Do you want to earn an extra R5,100 per month from simply opening an SMS
What I'm about to show you only takes about five minutes to put into action...
You won't have to crunch any numbers...
You won't have to calculate anything...
The basics of preference shares
If a company needs to raise capital, it has a few options. It can borrow money from the bank, it can issue bonds or it can issue preference shares.
By investing in preference shares, you’re buying a mixture of equity and debt. In other words, it’s a mix of a bond and a share in one.
What’s more, preference shares give you the majority of the benefits of investing in shares, apart from voting rights. But due to the debt element, you get a ‘guaranteed’ percentage dividend.
So when it comes to a company distributing its profits, preference shareholders are first in line to receive dividends.
If the company runs into trouble, it must pay preferred shareholders their dividends before paying common shareholders. In many cases, if the company missed any dividend payments, preferred shareholders have to receive all of their missed dividends before payments to common shareholders can start again.
And if there is a bankruptcy, preferred shareholders come after bondholders but before common stockholders in order of who receives funds.
Lastly, while preference shares trade on a stock exchange, and while prices move according to supply and demand, you will hardly ever see a major change in the prices.
Well, preference shares are mainly bought because their dividend yields tend to be high and fairly secure.
So if the price goes too high, the yield will be too low to be attractive. For example, a preferred stock with a 6% yield at R25 pays an annual dividend of R1.50. If the stock price rises to R50, that R1.50 dividend now represents a 3% yield.
The companies that offer preference shares are mainly financials and banks. But there are industrial and logistics companies that offer them too.
If you want exposure to preferred stocks but don't feel comfortable selecting the stocks yourself, you can always choose an exchange-traded fund (ETF) like the CoreShares PrefTrax.
But I prefer one preference share above all others.
Ten filthy secrets to get rich quick
Have you noticed how some people always seem to have more money than others? They don’t necessarily have better jobs. Nor do they always earn amazing salaries. They just have more money.
But where... How... Did they get it?
What’s their secret?
Well, I’ve just released my new book - Little book of Big Income - 10 Filthy secret to get rich quick – In it you will discover how ordinary people can become extraordinarily wealthy just by applying some fairly simple techniques – techniques the rich use to get even richer. But the secret to how they do it will astound you – the rich don’t do anything special, they just do it in a very special way, as I’ll explain in my e-book.
I’m releasing 300 FREE copies starting today so if you want to reserve a copy of one of these 300 right now, simply claim your copy of Little Book of Big Income Secrets.
A preference share with optimal balance of high liquidity and high yield of 12%!
There’s a preference share available right now that pays out dividends bi-annually at 88% of the South African prime rate (currently 10.25%). The best part is, if any dividends are in arrears, they increase their pay-out ratio to 100% of prime.
In other words…
Unlike most yielding assets in equity markets that perform poorly when interest rates rise, this preference share actually pays out more!
In addition, most preference shares listed on the JSE lack liquidity. This is a problem when it comes to buying and selling.
So what you’re looking for in the ultimate preference share is good liquidity coupled with a high yield.
For example, Invicta Holdings’ preference shares are yielding the highest but they come with escalating credit risk from both the company’s operations and potential tax claims that it’s currently facing.
Likewise, Imperial Holdings’ preference shares have the highest liquidity but you pay for this through a lower yield.
Whereas, my favourite preference share has…
The second highest dividend yield of 12% amongst the listed comparatives
The second highest liquidity in the market
Thus, it demonstrates the optimal balance of high liquidity and high yield with the opportunity for capital growth as well.
See you next week,
Managing Editor, Real Wealth
P.S. What steps can you take to start generating a REAL income today? It’s as simple as reading The Little Book of BIG Income
. This book will show you multiple ways
to generate consistent income to boost your overall retirement portfolio.