Preferensaktier – Swedish Preferred Stocks
Preferensaktier – Swedish Preferred Stocks.
Topic of today is preferred stocks/ preferrence stock
In Sweden we have a lot of preference shares around 30+. And its is sometimes very tricky to buy one. I mean what should i look out for when looking at preferred stock? Are they safe to invest money in? I will update you about the Swedish preferred stocks. You will also be given an easy explanation about preferred stock and what you should consider when buying a preferred stock.
So what is an preferred stock – preferensaktier?
Well the preferred stock is a mix of obligation, equity a bond, there is no strikt defenition of what a preferrence share is. But i see it as hybridy bond, a mix of security that includes properties of both common stocks and bonds, because you get a fixed dividend payout from the company. Even if the company is successful and earns more money the fixed dividend will surly not be increased.
What are the risks with preferred stocks – preferensaktier?
One of the dangers preferred stocks carry is that they are delicate to interest rates, the same goes with bonds.
Preferred stocks mainly pay dividends at a fixed rate in the 5 -7 % range.
The share price falls as prevailing interest rates increase.
If rates continue to be low the stock price can slowly crawl upwards but almost never higher then the stocks call price.
Some say the preferred shares are bad, that they are less secure then bond and if the company goes bancrupt they only have a secondary claim on companys assets.
They dont offer you good profit potential because some companies buy back the preffered stock when rates increase ( because then preferred stock fall in price ) or when a company gets better credit rating.
What is a stock call price?
It is an treaty packt that give the stock company the right, but not the obligation, to buy back the preferred stock at a specified price within a specific time period. Before you buy a preferred stock you should check this up. See if there is a price of which the preferred stock can be bought back from the company. Some preferred stock like Akelius dont have any specified buyback price or program and can be viewed as bond forever. A preferred stock that have and buyback program in near future can be seen a more secure.
Why buy preferred stock – preferensaktier?
Mainly you buy preferred stocks because of the higher yield. But you have to remember there are no easy money in the world and the higher yield the more riskier is the stock.
You should have it in mind when choosing preferred stock or common stocks.
Most preferred stock do have quaterly payout that give your portfolio better cashflow and also if the stockmarket get overheated and drops usually that dont affect the preferred stock.
Also a good thing with preferred stock – preferensaktier is that in event of bankruptcy, shareholders who have preferred stock receive company assets before common shareholders. But if companies is doing well preferred stock dont rise much compared to common shareholders.
If the companies come out with bad news to the shareholders, the common shares can decline a lot but preferred stock dont show big moves on price as long as company can pay the dividends price will stay relative unchanged.
A tips for those who want to get dividends every month from swedish preferensaktier is to buy Akelius pref, Klövern pref och K2A pref having those three preferred stocks in your portfolio covers payout all months. All of those preferred stock are REIT stock. Situation in Swedish REIT market is difficult to speculate. But with more people moving in to Sweden then moving out means that demand for housing and buildings is more than ever. The rate is also low right now the preferred stocks in secotor REIT is doing well.
Dont be sad, can find good preferred stocks – preferensaktier. Some say that is good to buy preferred stocks when they are undervalued. That can happen if rates goes up. You should not buy preferred stock when its close to its call price or when intrest rates are very low better to be patient and wait for the right moment.
My myself I want my portfolio to have around 10% of fixed income thats why I own preferred stocks. I look out for preferred stock that pay dividend 4 times a year for a more regular cash flow for my portfolio. In next post i will talk more about my preferred stock.
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Do you own a preferred stock and if you do what kind of preferred stock do you own.
Vilka preferenskatier har ni i Era portföljer?
You can click on more then one preferred stock
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I have no business relationship with any company whose stock is mentioned in this article.
Historical returns are no guarantee of future returns.
An investment in securities / funds can both increase and decrease in value and
it is not certain that you will return the invested capital.
The return may also increase or decrease due to changes in the exchange rate.