This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Banks Find New Way to Squeeze Investors: Street Whispers

BB&T recently issued noncumulative perpetual preferred shares with a coupon of 5.625%. This is a decent yield in the current environment, especially when considering that BB&T is in excellent shape, but it is a bitter pill for investors who recently had higher-paying trust preferreds pulled out from under them.

General Electric (GE) subsidiary GE Capital in June issued $2.25 billion in subordinated noncumulative preferred stock paying a fixed-rate of 7.125% until June 15, 2022, after which the shares will pay a floating rate, based on three-month Libor plus 529.6 basis points. That's a beautiful deal, with one catch: The minimum investment is $100,000.

GE Capital in July issued another $1.75 billion in subordinated noncumulative preferred -- again priced at $100,000 a share -- paying a fixed 6.25% until December 15, 2022, after which the shares will pay three-month Libor plus 470 basis points. This deal perfectly illustrates the dramatic and painful change in the market for fixed rate paper over the course of a month.

Another quality direction you may choose is energy limited partnership shares. Two lovely examples are Kinder Morgan Energy Partners, LP (KMP) and AmeriGas Partners LP (APU).

KMP is mainly a gas pipeline operator. The partnership shares have a yield of 6.15%, based on the most recently quarterly distribution of $1.23 and Tuesday's closing price of $80.03.

Kinder Morgan Energy Partners has had a very strong track record for dividend increases over the past several years, and the stock's five-year chart is rather lovely, showing plenty of growth on top of the income:

KMP Chart KMP data by YCharts

AmeriGas is a domestic propane distributor. The partnership shares have a yield of 7.58%, based on the most recent quarterly distribution of 80 cents, and Tuesday's closing price of $42.19. Like KMP, APU has been a winner over the past five years:

APU Chart APU data by YCharts

Of course, these are two extreme examples of income-oriented investments that have also brought home strong growth returns for investors.

You may also consider income-oriented ETFs, REITS, and other income-oriented investment vehicles. It is important to look in the mirror and consider your objectives. Depending on the investment vehicle and the direction of the economy, you could be facing declining share prices when interest rates rise. How will you react? If your objective really is to find a secure stream of income over a very long-term horizon, the movement of interest rates and share prices should not cause you to panic.

Then again, if you are obsessed with day-to-day price fluctuation, you need to rethink your investment income strategy.

RELATED STORIES:




-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,031.14 +43.63 0.26%
S&P 500 1,984.13 -1.41 -0.07%
NASDAQ 4,518.9020 -48.6960 -1.07%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs