I Am Buying Preferred Stocks Hand Over Fist

Let’s be honest—2025 has not been kind to the average investor’s blood pressure. Between the interest rate whiplash, AI-fueled market mania, and geopolitical hairballs clogging up global trade, trying to build a stable portfolio feels like playing Jenga during an earthquake. Meanwhile, your so-called “safe” Treasury bill ladder is just keeping pace with inflation, and your favorite dividend aristocrat just “restructured its payout” (read: slashed it).

In times like these, I find myself clinging to something a little less loved, a little less volatile, and dare I say—a little more elegant.

Enter: preferred stocks. And yes, I’m buying them hand over fist.

Wait—Preferred Stocks? Aren’t Those Just Boring Hybrids?

Exactly. And that’s the beauty of them.

Preferred stocks are the weird middle child of the equity family: not quite stocks, not quite bonds. They’re that friend who shows up to every party with a bottle of wine and leaves before midnight. You can count on them. They pay consistent dividends, have priority over common stock in a bankruptcy, and trade in relative obscurity while the rest of the market throws temper tantrums over CPI prints and Fed minutes.

I know what you're thinking: "But they don’t go to the moon!" You're right. They don’t. And in a market addicted to hopium and meme-driven sugar highs, that’s precisely why I want them.

What’s the Appeal in 2025?

Let me break it down for you:

• High yields: With many preferreds still trading at discounts to par after the 2022–2023 rate hike carnage, yields are juicy. We’re talking 6% to 9%+ in many cases. That’s income you can actually live on—or reinvest greedily.

• Rate stability: The Fed has mostly done its dirty work. We're hovering near a terminal rate, with soft landings being priced in like it’s a DoorDash coupon. This is good news for preferreds, which got crushed during the rising rate era but now have room to breathe—and rally.

• Deep discounts: Many preferreds issued before the rate hikes are still trading at $18–22 per share when their par value is $25. If you buy now and hold until they’re called or mature, you’re pocketing capital appreciation on top of the yield.

• Tax advantages: Most qualified preferred dividends get the same favorable tax treatment as common stock dividends. So Uncle Sam isn’t completely robbing you.

• Low correlation with tech meltdowns: When AI names like Nvidia and Super Micro Computer get a haircut after ridiculous run-ups, your preferreds probably just keep chugging along, spitting out dividends like a sleepy vending machine.

Preferreds I’m Buying Like a Man Possessed

Alright, enough with the theory. You came for ideas. Let’s talk tickers.

1. Bank of America Preferred Series L (BAC-L)

• Current yield: ~6.2%

• Why I love it: This one’s a fixed-to-floating rate preferred that becomes even more attractive if short-term rates stay elevated. It's also from a Too-Big-To-Fail bank that prints money on overdraft fees and Zelle transfers. BAC-L isn’t callable, which is a hidden gem in a call-heavy universe. Plus, it trades on volume and has decent liquidity.

2. Public Storage Preferred Series G (PSA-G)

• Current yield: ~6.5%

• Why I love it: You think people are going to stop hoarding junk in storage units during a recession? Please. PSA has fortress-like financials, and their preferreds are like bunkers with vending machines inside—safe and full of goodies.

3. Wells Fargo Preferred Series Q (WFC-Q)

• Current yield: ~6.8%

• Why I love it: I know, I know—Wells Fargo has a shady past. But it's cleaned up enough to be boring again. The preferreds offer solid income, and the bank is too politically connected to fail spectacularly. Besides, if we bailed them out once, we’ll do it again.

4. Digital Realty Preferred Series K (DLR-K)

• Current yield: ~7.4%

• Why I love it: You want AI infrastructure exposure without paying 70x forward earnings? Buy the preferreds of data center REITs. DLR is key to the internet’s backbone, and the preferreds have high yields with relatively low default risk.

5. New York Mortgage Trust Preferred Series E (NYMTN)

• Current yield: ~9.5%

• Why I love it: This one’s riskier, I’ll admit. It’s like walking into a dive bar—you might get a great drink, or you might get punched. But the yield compensates for it. NYMT has been managing its portfolio better post-COVID, and the preferreds have first dibs on payments.

But Aren’t Preferreds Illiquid, Complex, and Vulnerable?

Yes. And?

Let’s address the common objections:

1. They’re not liquid.

Correct. You don’t trade preferreds like you do Nvidia call options. But if you’re not a high-frequency hedge fund degenerate, that’s fine. You’re here for income, not fireworks.

2. They’re hard to understand.

If you can survive the plot of Tenet, you can understand a preferred stock prospectus. Just focus on:

• Coupon rate

• Call date and call price

• Payment priority

• Whether it’s cumulative (yes, please)

• Whether it floats (depends on your rate outlook)

3. They get crushed in recessions.

True—preferreds can fall during financial panics. But unlike common stock, they don’t have to recover to make you money. If you buy at $20 and hold until it’s redeemed at $25, you still win—even if the market forgets its name in the meantime.

Also, many are cumulative, meaning if the issuer suspends payments temporarily, they must pay you back later before paying common shareholders a dime. Try getting that promise from a tech growth stock.

Preferred Stocks vs. Common Stocks: The Drama-Free Alternative

Let’s compare a hot tech stock and a preferred from the same company. Take Bank of America:

• Common stock: Pays a modest dividend, highly sensitive to earnings and macro data, and trades like a cat on caffeine. Great for capital appreciation, not for peace of mind.

• Preferred stock (BAC-L): Pays out 6%+ like clockwork. Ignores earnings misses, CEO drama, and Reddit rumors. Just does its job.

If common stocks are the drama queens of Wall Street, preferreds are the quiet accountants—boring, consistent, and somehow always in better shape when the music stops.

Who Should NOT Buy Preferreds

To be fair, preferreds aren’t for everyone. Skip them if:

• You’re a total momentum chaser who panics during market dips.

• You need immediate liquidity (preferreds can take a while to sell without slippage).

• You don't understand how interest rates affect fixed income.

• You hate reading prospectuses (don’t worry, I’ll keep summarizing them for you).

But if you’re a long-term income investor who likes sleeping at night, prefers dividends over dopamine, and doesn’t want to bet the farm on whichever AI stock Jim Cramer is shilling this week—preferreds are worth your attention.

How I’m Building My Preferred Stock Portfolio

Here’s my approach:

1. Diversify by sector: I own preferreds in banks, REITs, utilities, and even some closed-end funds.

2. Balance credit risk: I mix investment-grade issues (like JPMorgan and Bank of America) with some riskier plays like mREITs and BDCs.

3. Ladder call dates: I own a blend of issues that are callable in 2025, 2027, and beyond, which helps with capital rotation.

4. Reinvest selectively: If I buy at a steep discount and the preferred trades closer to par, I consider rotating into another undervalued issue.

5. Watch the Fed like a hawk: Because, let’s face it, Jerome Powell is the invisible hand in all of our portfolios.

Final Thoughts: Why I’m All In on Preferreds Right Now

In a world where AI stocks have gone parabolic and U.S. politics feels like a reality TV reboot, I crave predictability. Preferred stocks offer exactly that—predictable income, decent capital appreciation, and tax efficiency, all wrapped up in a relatively low-drama package.

Sure, they’re not sexy. They don’t go viral on Twitter or get pump-and-dumped by retail bros. But they work. They do their job. And in a market where everything feels like it’s held together by vibes and TikToks, I want more of that.

So yes, I am buying preferred stocks hand over fist. And unless the Fed decides to nuke the yield curve or the entire banking system spontaneously combusts again, I’ll keep on buying them.

Because boring, in this market, is beautiful.

Preferred Stock Investing, 5th Ed. Paperback – July 19, 2013