Before we get into this piece, I have to tell you: this might be one of the most boring niches in the market. You probably won’t be bragging about this investment around the office water cooler. Most of my colleges snooze whenever I bring it up at our weekly editorial meetings. But while they have the excitement of paying taxes, it also returns a higher yields than nearly any other safe investment around today. And unlike bonds, these issues have no set maturity date. So unless the business shuts its doors–a pretty unlikely scenario–investors will likely lock in their income stream for life.
The investment is actually a “preferred stock” that trades on the New York Stock Exchange. It was issued by Annaly Capital Management, Inc. (NYSE:NLY). So your main concern is the creditworthiness of the company, Annaly Capital, which buys government guaranteed mortgages. What I love about these preferreds, to put it bluntly, is that if Annaly goes bust, you’d get paid all of your investment back, as well as any outstanding interest before shareholders–including the CEO–see one red cent. And that is the big advantage of “preferred” shares over regular common stock. If a business goes under, then bondholders get their money first, preferred shareholders get their money second, and common shareholders get their money last.
Source: Income Investors
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