This preferred issue has a nice yield and is backed by a large North American insurance carrier.
The Allstate Corporation (ALL-PI)
From Income Securities Investor
Allstate Corp.; 4.75% Fixed Rate, Non-Cumulative Perpetual; Par $25.00; Annual Cash Dividend $1.1875; Current Indicated Yield 5.16%; Call Date 01/15/25 at $25.00; Yield to Call 6.67%; Pay Cycle 1m; Ratings, Moody’s Baa2, S&P BBB; CUSIP 020002812; Symbol ALL-I
Allstate Corporation is the largest publicly held personal lines insurance carrier in the United States, offering Property, Auto, Power Sports, Life/Retirement, and Business policies. The company has consistently achieved solid operating margins in its auto and underlying homeowners’ lines.
This issue is callable at par plus declared dividends on 01/15/25, or any dividend payment date thereafter.
ALL reported Q419 adjusted net income of $1.02 billion or $3.13 per share, topping analysts’ estimates by a penny. While the company has beaten quarterly earnings estimates for the last four reporting periods, the outlook for 2020 is quite challenging.
This issue carries one of the lower dividends in the fixed-rate preferred market. That reflects ALL’s investment grade preferred ratings, although this positive is partly offset by the dire market environment created by the COVID-19 outbreak.
We expect this security to continue to trade at a discount in 2020. From a credit perspective, we remain positively disposed towards ALL and recommend this 4.75% preferred issue for low-to medium-risk taxable portfolios.
Dividends are qualified and taxed at the 15%-20% rate. Buy up to $24.50 for a 4.85% current yield, and yield to call of 5.22%.
Martin Fridson, CFA, Income Securities Investor, www.isinewsletter.com, 800-472-2680, April 2020