First Horizon's Preferred Stock Yields Above 6.5% Amid Decline

First Horizon Corp's stock analysis reveals concerns as its 4.70% Non-Cumulative Preferred Stock sees a yield above 6.5%. The shares are trading significantly below liquidation preference, indicating potential investor risk.

Date: 18-02-2025

AI Rating: 5

First Horizon Corp's preferred stock (FHN.PRF) is currently yielding above 6.5% due to its quarterly dividend of $1.175. This yield is above the average of 6.43% in the Financial category, suggesting a strong income potential for investors seeking dividends. However, the shares are trading at a 27.60% discount to their liquidation preference, which is a significant divergence from the average 7.59% discount in the same category.

The substantial discount indicates perceived risk among investors regarding the preferred stock, particularly since these shares are non-cumulative. If the company were to miss a dividend payment, it would not be required to catch up on missed payments. This aspect raises concerns over the financial stability of First Horizon Corp and the reliability of its dividend payments in the future.

Additionally, while the common shares of First Horizon (FHN) experienced a slight uptick of about 0.5%, the preferred shares declined by about 0.1%. This contrasting performance could suggest a divergence in investor confidence between the preferred and common shares.

Overall, while there is a strong yield associated with the preferred shares, the significant discount to liquidation and non-cumulative nature raises caution. Investors should weigh the potential for income against the associated risks before making investment decisions.

Stocks: FHN