These products tend to be offered by firms requiring large amounts of capital, and include utility companies and financial institutions. As you can image, the financial institutions have not been "feeling the love" of late, but that's OK, as my interest is in the utility products - an industry sector I've studied for over two decades now.
Many are rated by the big rating agencies (for what that's worth), but as with all investing, doing your own due diligence (DD) is critically important. I look for well-established, large-cap utilities that offer these products (i.e., these are a financial obligation of the company, so I want to be highly confident they can pay their debts). Best to search for reasonable liquidity, for ease of entry and exit, but these are to be treated as investing vehicles, not trading instruments. You buy and hold these primarily for steady income and stability of principal. In some cases, there may be some capital appreciation, but most of these products trade at or near their "par value" (usually $25/share) so little gain is to be expected.
Here are some I own
> SCU (parent SCANA; currently paying about 7.4%)
> EMO and EHL (parent Entergy; 7%)
> FGC (parent FP&L; 6.4%)
> XCJ (parent Xcel Energy; 7%)
If you want the highest rated security of this type, check out
> TVC, and TVE both backed by TVA, the federally-owned utility (currently paying about 4.5%)
I have no hesitation putting these in retirement accounts or using them to park cash for at least six months.
BTW - Trading tips (based on personal experience).
> Enter the trade using "limit" orders (you may have to go in at the "ask" to get filled, but that's OK, as the "bid/ask spread" is usually just a few cents for many of these)
> Include an "all-or-none" instruction (otherwise you may only get a partial fill of 19-shares, as happened to me, necessitating a scramble to obtain the remaining 81 shares for an even 100-share lot)
There are many more similar exchange-traded debt products, backed by top blue-chip industries (e.g., IBM, GE, Disney, Goldman Sachs) that I track -- and invest in -- but that is a topic for another day. Some pay close to 10%, and have capital appreciation potential, as well.
Comments are welcomed at paulmess@gmail.com
