If you are on the hunt for yield, take a closer look at Kimco Realty’s preferred shares. The owner/operator of North America’s largest portfolio of shopping centers has four classes of preferreds, with yields as high as 7.137%. Here’s a closer look at Kimco Realty and its preferred shares outstanding.
|Security||*Ticker Symbol||**Current Yield||**Recent Price||***Callable On or After||Prospectus|
*Symbol varies depending on broker. Using Class K as an example, may be KIM prK, KIM/PK, KIM-PK, etc.
**As of January 3, 2014
***Callable at $25 – Can be called earlier in order for the company to preserve its status as a REIT
1. Are the dividends paid by these preferreds considered “qualified dividend income” for tax purposes?
It is my understanding that the dividends of the preferred stocks mentioned in this article are not considered “qualified dividend income” for tax purposes. If you decide to purchase any of the preferreds, spend some time considering the merits of owning REIT preferreds in a tax-advantaged account (such as an IRA).
2. Aren’t these relatively illiquid securities?
Yes, these are relatively illiquid securities. Keep in mind that just because there are wide bid-ask spreads does not mean you must accept the offer price. Over the years, I’ve had surprising success getting buy orders filled at the bid price. Intuitively, it can make sense that I would have such success in illiquid securities. If someone else wants out of his or her position, that person needs to find a buyer. If you are willing to buy and let your intentions be shown to the market via a buy order placed at the bid, a willing seller may see that new liquidity and jump at the opportunity to get out.
3. Should I be concerned about the fact that there is no maturity date?
As someone who is content with timeless exposure to preferred stocks, and as someone who manages personal liquidity in a way that ensures preferred stocks would not need to be sold at an inopportune time, I am not concerned by the perpetual nature of these securities. Your situation may be different, and I certainly understand why the lack of a maturity date would cause some investors to shy away from these preferred stocks.
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