These preferred shares are issued by one of the largest banks in the nation. Emerging from some of its legal woes, the bank has a fairly new management team.
Wells Fargo & Company Depositar (WFC-PA)
From Income Securities Investor
Wells Fargo & Company; 4.70% Fixed Rate, Series AA, Non-Cumulative Perpetual; Par $25.00; Current Price $26.14; Current Indicated Yield 4.49%; Call Date 12/15/25 at $25.00; Yield to Call 3.58%; Pay Cycle 3m; Moody’s Baa2, S&P BB+; CUSIP 94988U128
Wells Fargo & Company (WFC) is a diversified, regional-based financial services institution with $1.95 trillion in total assets. The bank holding company provides consumer and commercial banking, investment management, and a full array of mortgage products and services, in addition to consumer and commercial finance.
The company has a relatively new management team in place, focused on improving earnings and profitability and strengthening internal controls. WFC’s 4.70% fixed rate preferred is callable on 12/15/25 or any dividend payment date thereafter, at par plus any declared and unpaid dividends.
The company reported 2Q 2021 net income of $6.0 billion or $1.38 per share, topping analysts’ $0.97 estimates. Earnings largely benefited from a $1.6 billion decline in the loan loss provision, as WFC released reserves as expected pandemic- related losses never materialized. Revenue of $20.3 billion was also ahead of analysts’ expectations of $17.8 billion. Credit quality remains resilient, although WFC indicates losses will potentially increase from relatively low levels by historical standards. 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. WFC’s senior debt is rated A2 by Moody’s and BBB+ by S&P. Buy at or below $26.35, which represents a current yield of 4.46% and a yield to call of 3.38%.
Martin Fridson, CFA, Income Securities Investor, isinewsletter.com, 800-472-2680, May 2021, August 2021