This preferred stock is backed by a Silicon Valley bank that provides services to companies in the technology corridor.
SVB Financial Group (SIVBP)
From Income Securities Investor
SVB Financial Group; 5.25% Fixed Rate, Non-Cumulative Perpetual; Par $25.00; Current Annualized Yield 5.29%; Call Date 02/15/25; Yield to Call 5.42%.
SVB Financial Group (SIVB) is a bank holding company based in Santa Clara, CA. Since inception, the company has assisted innovators in the technology and biotech sectors, along with their investors. The banking company is a key advisor and lender to companies in sectors such as Hardware & Frontier Technology; Software & Internet; Life Sciences & Healthcare; Energy & Resource Innovation; Private Equity & Venture Capital; and the Premium Wine Industry.
SIVB has historically achieved strong growth, driven by the exceptional growth of its clients and their related industries. The company reported first quarter 2020 net income of $132.3 million or $2.55 per share, missing analysts’ $3.07 estimates. Results were down sharply, due to higher loan loss provisions on top of the expected increase in realized loan losses, tied to weakening economic conditions arising from the COVID-19 pandemic.
Despite the likelihood of higher loan loss provisions and lower earnings throughout 2020, we are constructive on SVB’s outlook, given the banking company’s strong capital position and present low level of non-performing loans.
Dividends on this issue are taxed at the 15%-20% rate. This preferred is split-rated between investment grade and non-investment grade. However, senior debt ratings are investment grade by both Moody’s and S&P.
As a result, we recommend this issue for low- to-medium-risk taxable portfolios. Buy up to $25.50 for a 5.15% current yield and a 4.79% yield to call.
Martin Fridson, CFA, Income Securities Investor, www.isinewsletter.com, 800-472-2680, May 2020