to be clear i am not a long term corporate bond fan as they tend to underpeform long term treasuries. i suspect the same is likely to be true of the wells fargo preferredright but as Grabiner points out
It strikes me that a good preferred may be a reasonable alternative to a bond in terms of providing an income portion to your portfolio. If one is looking to lock in a certain fixed yield, I'm not sure I see much difference between a bond and a preferred. (Yes, I understand that in a corporate hierarchy of payments, bonds have a preference over preferreds, which have a preference over common dividend. That difference only becomes meaningful if the corporation has deep financial problems.)
I am and have always been an equity guy. My portfolio is at least 90% equities. Many of those are dividend payers, so I get both income and growth. (Yes, I know many on this forum have antipathy towards dividend payers, so no need to add comments on this.) That said, with the market currently at pretty high levels and with yields currently more interesting compared to prior years, I have started to acquire some munis in my taxable account and have added a bit of this preferred (WFCPRL) in my Roth account.
Even as an equity guy, it's hard not to like a 6% yield payable long into the future with the potential of a small capital appreciation for my heirs.
[quote=Grabiner}
The current yield on VCLT (Vanguard Long-Term Corporate Bond ETF), with a duration of 13 years, is 5.45%; you take more risk on the individual preferred stock for a small gain.
cheers,
grok
[/quote]
This really piqued my interest so I ran PortfolioVisualizer for VGLT vs. VCLT and it turns out this is not the case. Over a period of 10 years, Annualized Return (CAGR) for corp. is 2.56%, while it's -0.10% for long-term treasuries. Both are a disaster BTW but corporate is still much better.
Statistics: Posted by Alex GR — Wed Dec 11, 2024 10:41 am
