This preferred stock has above average yields, and is issued by an insurance company that beat quarterly earnings estimates by almost 11%.
Brighthouse Financial, Inc. (BHFAO)
From Income Securities Investor
Brighthouse Financial, Inc.; 6.75% Fixed Rate, Non-Cumulative Perpetual; Par $25.00; Annual Cash Dividend $1.6875; Current Indicated Yield 6.26%; Call Date 06/25/25 at $25.00; Yield to Call 4.74%; Pay Cycle 3e; Ratings, Moody’s Ba1, S&P BBB-; CUSIP 10922N509;
Brighthouse Financial, Inc. (BHF) is a major U.S. provider of annuities and life insurance. The company is one of the nation’s largest life insurers. BHF was created by MetLife (MET) in August 2017 in line with MET’s business objective of separating a substantial portion of its U.S. retail life and annuity business from the main company.
BHF has strong insurance subsidiary claims-paying ratings, namely, Moody’s, S&P, Fitch, and A.M. Best ratings of A+, A3, A, and A, respectively. The company’s 6.75% fixed rate preferred is callable at par, on or anytime following the 06/25/25 call date.
BHF reported 4Q 2020 adjusted net income of $272.0 million or $3.03 per share, easily beating analysts’ $2.73 estimates. Moreover, adjusted net income advanced 23.2% from a year earlier. Adjusted operating revenues of $2.54 billion also topped expectations, helped by continued solid sales growth in the annuities and life businesses.
Dividends on this preferred issue are qualified and taxed at the 15%-20% rate. This investment is suitable for low- to medium-risk taxable portfolios. Despite the Ba1 preferred rating by Moody’s, we are positively disposed, given the ‘A’ category claims paying ratings at BHF’s insurance subsidiaries.
Buy at $27.75 or lower for a 6.08% current yield and 3.99% yield to call.
Martin Fridson, CFA, Income Securities Investor, isinewsletter.com, 800-472-2680, March 2021