No. of Recommendations: 3
First Horizon Bank Preferred Shares Series D offers YTM of around 22%.
FHN-D is trading at $21.65 and pays a dividend of $1.525/annum semi-annually on Nov 1 and May 1, which is 7% yield.
The shares are redeemable at issuer's option on May 1,2024 at a price of $25. So if redeemed, the yield to maturity is over 22% in 314 days.
Most preferred shares are redeemed and the expectation is FHN will redeem it. If not redeemed the dividend resets to 3m LIBOR + 3.859% which currently is 5.54 + 3.859 = 9.435%. If FHN can issue new preferreds for less in May 2024, it most certainly will.
The risk is that these preferred are non cumulative, so dividends may be skipped.
And FHN is a mid-sized bank and if there is another run on them, hard to say what the outcome would be. You may lose your entire investment, if the bank has to be closed and sold off by FDIC.
On the other hand TD Bank had agreed to acquire FHN, but called it off in May, when they could not get approval from regulators. TD is a very well-capitalized and well run Canadian bank with substantial presence in US retail banking and were trying to grow in the SE USA by acquiring FHN. So you can rely on their due diligence if you choose to, or do your own.
Of course, great time to pounce on FHN-D would have been on May 4,the day TD called off the merger, when panic selling dropped the price to $16.50. At that price TYM was over 60%. Still 22% in 10 months today is not bad for a fairly safe fixed income security.
https://www.quantumonline.com/search.cfm?tickersym... 