Investment Perspective on Preferred Stock
Vision Advisors views preferred stock as an investment vehicle that can be used to help meet an individual's income needs. Vision Advisors has a specific process that helps the selection of the appropriate preferred stock for a client's portfolio.
There are three levels of preferred stock:
Level I: This level of preferred stock currently produces dividends of approximately 6% per annum, and includes companies such as Citigroup, JP Morgan, Lehman Brothers and Merrill Lynch. These securities are generally rated from AA to AAA.
Level II: This category of preferred stock includes companies with higher yields than those of Level I. Companies in Level II include various Real Estate Investment Trusts. These securities are generally rated from BBB to A.
Level III: This final category is considered to be "junk" preferred stock. Companies in this category include airline stocks and automobile stocks. These securities are generally rated below BBB.
The preferred stocks in Level III tend to pay a higher dividend rate, but they may not be worth the additional risks. Vision Advisors believes that Level II preferred stock is appropriate for certain accounts that are willing to take greater risks for greater returns. By in large, the vast majority of preferred stocks Vision Advisors invest in are Level I.
