US Bancorp Preferred Stock Yielding Above 5% Amid Discounts

Shares of US Bancorp's preferred stock have reached a yield exceeding 5%, with significant discounts noted. This suggests potential risks for investors due to the non-cumulative nature of dividends. The report highlights the company's current trading climate and implications for overall stock performance.

Date: 30-09-2024

AI Rating: 5

The report discusses the trading activity of US Bancorp's 4.50% Dep Shares Non-Cumulative Perpetual Preferred Stock Series O (USB.PRS). Specifically, it highlights a yield that exceeds 5% based on its quarterly dividend, which is annualized to $1.125. However, this must be viewed in the context of the average yield of 6.30% in the financial preferred stock sector. The difference in yield suggests that the USB.PRS could be considered less attractive compared to its peers.

Additionally, the report states that shares of USB.PRS are trading at a 9.12% discount to their liquidation preference amount. This is significantly greater than the average discount of 4.43% in the financial category. A higher discount might indicate investor concerns about the stock or specific issues within the company, potentially leading to a lack of confidence.

Importantly, the preferred shares are categorized as non-cumulative. This denotes that if the company defaults on dividend payments, it is not obligated to cover those missed payments before resuming dividends on common stock. Investors need to understand the implications of this structure as it increases the risk associated with holding these shares.

Moreover, the report notes that during Monday trading, USB.PRS decreased by about 1.2%, while the common shares of US Bancorp (USB) increased by about 1.6%. This divergence indicates a difference in performance between the preferred and common stocks. An investor might interpret the rise in common shares as a potentially more stable investment or reliant on positive market performance.

Overall, the analysis of the report shows a cautious outlook for USB.PRS, given the concerning yield comparisons, pricing discounts, and non-cumulative dividend structure. Investors need to weigh the risks and rewards of this preference share in the context of market conditions and overall company performance.

Stocks: USB