This preferred stock has a current annual yield of 6.76%, and is backed by a lodging Real Estate Investment Trust with a market cap of $2.75 billion.
RLJ Lodging Trust (RLJ-PA)
From Sound Advice
RLJ Lodging Trust (RLJ-PA) $1.95 Series A Cumulative Convertible Preferred Shares is often quoted as RLJ.PA, but on the iPhone it is RLJ’A, and Fidelity uses RLJPRA. In any case, this is the only RLJ preferred stock.
Normally, preferred stocks have a call provision whereby the company can buy them back at a certain price (par value) at a certain date (call date). However, this preferred does not have this provision which means this stock has unusual upside potential.
The only way the company could redeem this preferred stock is if RLJ common rose to $115.82 per share, an enormous rise in RLJ from its current price, which we are not forecasting any
time in the foreseeable future. Instead, the upside potential comes from a drop in the yield on this preferred, which is highly likely.
This preferred stock pays $1.95 annually per share (which must be paid before the common stock dividend) providing a yield of more than 6%. If the yield drops to, say 5%, which would still be a good value, the price of this preferred would rise substantially because there is no call provision. At a 5% yield, the price of this stock would be $39 per share, a 34% increase. Meanwhile, the yield is excellent. It is also quite secure.
Gray Cardiff, Sound Advice, www.soundadvice-newsletter.com, 800-825-7007, February 3, 2020