Anyone buying a house with a mortgage right now understands how high rates have gotten. According to the Mortgage Bankers Association, while rates have fallen for four consecutive weeks, a 30-year fixed mortgage still averages 7.21%.
Except for a short time in October 2023, the rate hasn’t been this high since 1999.
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Typically on Wednesdays, I discuss stocks or ETFs that have hit new 52-week highs or lows. Today, I wanted to focus on income-related investments other than dividend stocks.
Of the 114 securities trading on the NYSE that hit new 52-week lows on Tuesday, 49 were preferred shares or some fixed-income instrument.
Homeowners who can save beyond their monthly mortgage payment shouldn’t dismiss preferred shares and fixed-income investments outright.
High interest rates cut both ways. While a significant amount of money goes toward the mortgage payment, holding these income-related investments to maturity can provide additional cash flow and help cover some of the burden.
However, when buying single-issue bonds and preferreds, the price can move up and down like a stock based on the interest rate relative to prevailing rates at the time.
That’s why you’re seeing many single-issue debt-related securities hit new 52-week lows. As prevailing rates rise, your particular coupon rate becomes less attractive; the opposite is true when rates fall relative to your coupon.
Of the 49 preferred shares and fixed-income securities that hit new 52-week lows yesterday, here are three you might consider for a long-term hold.
Brunswick Corp. 6.375% Senior Notes due April 19, 2049 (BC.PRC)
Brunswick (BC)issued $230 million of these unsecured notes in March 2019. Because the notes are unsecured, they rank behind any of the boat maker’s secured obligations, but equal to any other unsecured debt Brunswick holds.
In December 2018, it issued $115 million in 6.625% Senior Notes due January 15, 2049. Except for $200 million 5.10% Senior Notes due April 1, 2052, the 6.375% and 6.625% notes are Brunswick’s longest-duration maturities.
Approximately 67% of the company’s $2.2 billion in total debt is unsecured. It has no debt maturing before 2029.
Starting on April 15, 2024, Brunswick had the right to redeem some or all of the 6.375% notes at 100% of the principal, which is $25 per note. In 2025, they redeemed $15 million of the $230 million.
Why do I like these notes?
For every $100 in notes held, the investor receives nearly $6.38 in interest annually. That’s nearly $1 more than the average of the 30-year U.S. Treasury at 5.358% and the 20-year U.S. Treasury at 5.398%.
As you can see, the 20-year interest rate is slightly higher than the 30-year Treasury. That’s because the shorter term slightly reduces interest rate risk.
Will the 20-year Treasury interest rate move higher?
It definitely could. In July 2020, it was 1.09%; in October 1981, it was over 15%, the highest it’s been since January 1962.
I’m the farthest thing from an expert on interest rates, but if I had to forecast the future, I’d say they could go a little higher, but it’s unlikely we’ll return to the interest rates of the late 1970s and early 1980s.
As of Q3 2026, Brunswick’s net debt was $1.93 billion, below the five-year average of $2.15 billion. Meanwhile, its EBITDA (earnings before interest, taxes, depreciation and amortization) was 7.23 times its net debt. That compares to 5.82x for BRP (DOO)and 4.47x for Polaris (PII).
AT&T Inc. Dep. Pfd. Rep. 1/1000th 5% Perp. Pfd. Series A (T.PRA)
I’m neither pro nor con AT&T (T). As a company, it has made some colossal mistakes, mostly driven by management’s desire over the years to make legacy deals. The most recent was its merger and subsequent unmerger with Time Warner, which is now part of Skydance (SKYD). Many hours were diverted from its core business, which hurt shareholder returns.
The company is back to just being a large wireless and broadband business. That will help profitability. I still think Verizon Communications (VZ)and T-Mobile (TMUS)are better businesses, but at least it’s on the right track.
In December 2019, AT&T issued 48 million depositary shares at $25 each. They represented a 1/1000th interest in its 5.000% Perpetual Preferred Stock, Series A.
The yield for those who bought some in the December 2019 offering would have been 5%. Today, T.PRA preferred shares trade at a 36% discount to the issue price. As a result, the yield has moved up to 7.8%, about 280 basis points higher than AT&T’s dividend yield.
The biggest concern with AT&T is that its total debt, despite selling its media assets, is still high at $180.6 billion, about 122% of its current market cap. It currently spends $1 in interest for every $3.90 in EBIT (earnings before interest and taxes) profits.
Nonetheless, it’s been in business for 141 years, in one form or another, so it’s unlikely to go under anytime soon.
One potential idea: Buy the preferreds and hold them until the company’s dividend yield is higher than the preferred yield. Then buy the stock. The last time that happened was in 2023.
General American Investors Co. Inc. 5.95% Cum. Pfd. Series B $1 par value (GAM.PRB)
General American Investors (GAM)is one of the older closed-end funds in the U.S. The company was founded in 1927 and listed its shares on the NYSE in 1930.
Closed-end funds issue a fixed number of common shares through an IPO. Once trading, it can’t issue more common shares. To finance growth, it can issue preferred shares.
The closed-end fund issued $200 million of the 5.95% Cum. Pfd. Series B $1 par value, on Sept. 24, 2003. The $1.4875 annual interest payment currently yields 6.7%.
On Nov. 4, the closed-end fund declared its year-end dividends and distributions that will be paid on Dec. 30, 2026, to shareholders of record on Nov. 16. The total payment will be $7.43 per share, broken down as follows: A $6.52 a share distribution for net long-term capital gains, a $0.15 a share distribution for net short-term capital gains, and a dividend of $0.76 per share from estimated undistributed net investment income for the full year 2026.
Based on a $65.82 share price, the overall yield for the common stock, including all three amounts, is 11.3%. However, it would be higher if the share price discount to net asset value were higher. Over the past decade, the discount has ranged from a high of 18.79% in 2016 to a low of 9.63% in 2026.
Over 3- and 5-year periods, GAM has outperformed the S&P 500. Its common shares are not a bad investment.
In the quarter ended Sept. 30, GAM’s 13F had $1.71 billion invested across 71 stocks. The top 10 accounted for 42.1% of the $1.71 billion.
The way I see it, combining General American Investors’ common and preferred stock gives long-term investors an excellent one-two punch for generating above-average returns.
On the date of publication, Will Ashworth did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
