3 Preferred Stocks to Buy Instead of Junk Bonds

Junk bonds, also known as high-yield bonds, sound like a great idea when the economy is in decent shape. Yet, throw in low oil prices, a falling stock market and some dubious employment data, and suddenly those junk bonds begin falling in price. That’s because junk bonds are bonds whose underlying issuers are in the weakest financial shape, thus they’re least able to handle any kind of cash flow stress. Right now, we’re seeing energy sector junk bonds get hit the most, especially those involving fracking.

As oil prices fall, frackers can’t as much money for the oil they produce, which means less cash flow and trouble making bond payments. So while some junk bond exchange-traded funds are down 20%, you may want to look for more stable places for high yields, and that means preferred stock. Preferred Stocks to Buy: Ashford Hospitality Trust, Inc. (AHT-D), Public Storage (PSA) and Texas Capital Bancshares Inc (TCBIP).

Source: InvestorPlace

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