But with the profitable Fannie May having $3.2 trillion in total assets, while it profitable sister firm Freddie has $2.0 trillion in assets, junior preferred shareholders -- and obviously common shareholders -- see plenty of wealth to go around.
GSE junior preferred shares also popped on Friday. Here are our usual two examples:
Fannie's preferred series E shares, with a coupon of 5.10% and a par value of $50.00, closed at $14.00 Friday, rising 59% for the day. The shares trade under the ticker FNMFM and have risen 775% from $1.60 at the end of 2012
Freddie's preferred series Z shares, with a coupon of 5.375% and a par value of $25.00, closed at $6.49 Friday, rising 11% for the session. The shares trade under the ticker FMCKJ and have risen 271% from $1.75 at the end of last year.
There's no telling what presumably ridiculous way forward the Obama administration and Congress may plot for the GSEs, but their junior preferred and common shareholders could be gearing up for a nasty fight. And with the earnings continuing to flow, the junior preferred dividends could be restored.
Fannie's preferred series E shares are supposed to pay annual dividends of $2.25 a share. If the dividend were restored, an investor who went in at Friday's close would see a dividend yield of 16.07%.
Freddie's preferred series Z shares are supposed to pay annual dividends of $1.34 a share. If the dividend were restored, an investor who purchased the preferred Z shares at Friday's close would see a dividend yield of 20.65%.
Of course, if the junior preferred dividends were to be restored, the shares would likely bounce right up to par, leaving investors free to book massive profits, or reap very high dividends, assuming they went in at deep discounts.
-- Written by Philip van Doorn in Jupiter, Fla.