Banco Santander, S.A. (NYSE:SAN) Fixed-to-Floating Non-Cumulative Guaranteed Series 11 Preferred Securities (NYSE:SAN.PRF)
Current yield: 10.50%
Liquidation preference: $1,000
Recent market price: $1,000
Total value of preferred stock issued at the end of Q2 2013: EUR 5.4 billion.
First half 2013 EBIT: EUR 10.6 billion
Banco Santander, S.A. (NYSE:SAN) offers two types of preferred stock, the 10.5 percent listed here and another issue offering around 8 percent. Santander is one of the Eurozone’s most stable banks and yield on its preferred stock is easily covered by net income. This preferred issue has traded at around a 5 percent premium to its liquidation preference on average during the past three years. However, even without any capital growth, the yield is enough to consider this issue as a good play on the European banking recovery.
Callon Petroleum Company (NYSE:CPE) 10.0% Series A Cumulative Preferred Stock (NYSE:CPE.PRA)
Current yield: 11.30%
Liquidation preference: $50
Recent market price: $44.25
Discount to liquidation preference: $-5.75 (-11.50%)
First half 2013 EBITDA: $16 million
First half 2013 Interest Costs: $3.1 million
Callon Petroleum’s preferred stock currently offers an 11.3 percent yield and trades 11.5 percent below its liquidation preference. During the first half of the year, debt interest was covered 5.2 times by EBITDA and debt stood at 25 percent of assets. With an 11.5 percent annualized yield on offer and the possibility of an 11.5 percent upside, Callon’s preferred stock could be a risk worth taking.
Greenhunter Resources Inc (NYSEMKT:GRH) 10% Series C Cumulative Preferred Stock (AMEX:GRH.PRC)
Current yield: 13.44%
Liquidation preference: $25
Recent market price: $18.60
Discount to liquidation preference: $-6.40 (-25.60%)
First half 2013 EBITDA: $2.1 million
First half 2013 Interest Costs: $0.5 million
Easily the smallest company in this piece, with a market capitalization of $44 million, Greenhunter Resources Inc (NYSEMKT:GRH) could be too much of risk for some. That said, total debt is only 27 percent of assets and interest costs were covered four times by EBITDA during the first half of the year. Trading at a discount to liquidation preference of 26 percent and currently offering an annualized yield of 13.4 percent, the payout on offer could be enough to tempt some investors.
Indeed, Greenhunter Resources Inc (NYSEMKT:GRH) is a business on the move. At the end of the second quarter, revenues were up 111 percent and the company had nearly dragged itself into profit.
Molycorp Inc (NYSE:MCP) 5.50% Convertible Preferred Stock (NYSE:MCP.PRA)
Current yield: 26.73%
Liquidation preference: $100
Recent market price: $20.58
Discount to liquidation preference: $-79.42 (-79.42%)
First half 2013 EBITDA: -$7 million
First half 2013 interest costs: $27 million
Despite being the second largest company in this piece, Molycorp Inc (NYSE:MCP) could be the most risky.
Pressured by falling margins and rising costs, Molycorp’s EBITDA did not cover interest costs during the first half of this year. The firms net-debt-to-asset ratio was 35 percent at the end of the second quarter, and the company hemorrhaged $270 million in cash during the first half of this year and $1.4 billion last year. Still, a 26.7 percent annualized yield and a 385 percent upside to liquidation preference equals out the risk/reward ratio.
For more information: http://www.preferredstockchannel.com/