Charles Schwab Series J Preferreds: Discount Looks Better Than Value
Summarize this article with:
Bashar Issa7.15K FollowersFollow5ShareSavePlay(9min)CommentsSummaryCharles Schwab Series J Preferreds have declined significantly from their issue price due to rising interest rates.SCHW.PR.J's perpetual structure exposes holders to ongoing interest rate risk, as there is no set maturity date.Redemption is unlikely when the securities become callable in June 2026, given the $25/share redemption price versus the current $18.27 price.Management is incentivized to call preferreds only if refinancing is accretive to EPS, making near-term redemption improbable. jetcityimage/iStock Editorial via Getty Images Investment Thesis I rate Charles Schwab's (SCHW) Series J Preferred Shares (SCHW.PR.J) a "Hold." Although SCHW.PR.J (Series J Preferreds thereafter) trades at a steep discount to the redemption price; this discount is not thesis-changing. When factoring in Series J's modest $1.11 annual coupon (distributed quarterly), itThis article was written byBashar Issa7.15K FollowersFollowBashar is a contributing writer at Seeking Alpha, focusing on Long/Short investment ideas, with a geographic focus in North America. Before that, Bashar worked at an Investment Fund in the United Kingdom. He has a Master's degree in Finance from the Queen Mary University of London and a Bachelor's degree in Economics from Middlesex University.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.