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Invest the Buffett Way: Buy Common AND Preferred Shares

Berkshire's Heinz deal demonstrates how to invest in both

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Charles Schwab

Preferred: NYSE:SCHW-PB

The discount broker announced Feb. 21 that its 15 equity and fixed-income ETFs reached $10 billion in assets under management only three years after setting up shop in 2009.

I write a weekly article about ETFs, so I’m well aware of Schwab’s dirt-cheap ETFs; they’re the least expensive of all the fund companies, including Vanguard. Even better, all of its funds have at least $200 million in net assets, with three at more than $1 billion in AUM. Guggenheim recently announced it was liquidating nine ETFs, and fund closings continue to happen on a regular basis, but Schwab’s ETF investors can rest easy knowing theirs won’t.

Schwab’s 6% Non-Cumulative Perpetual Preferred, Series B, closed trading Feb. 21 at $26.34, about 6% above the $25 issue price from last June. They currently yield 5.7%. The preferred shares are non-cumulative, which means Schwab does not have to make up for any missed dividend payments — that’s unlikely happen, but worth keeping in mind. In addition, Schwab can begin redeeming the shares in September 2017.

The combined yield of Schwab’s common and preferred as of February 21 is 4.1%.

Article printed from InvestorPlace Media,

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