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Author: Reitnut Big red star, 1000 posts Top Favorite Fools Feste Award Nominee! Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 77103  
Subject: Re: A Rare Convertible Win: DGRDP Date: 3/3/2013 7:21 PM
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Another potential REIT pfd convertible win is RPTpD. The $50 par value preferred is convertible into 3.47 common shares (or $14.41 per share). The common closed on Friday at $15.69, so the pfd is aleady "in the money." The pfd's intrinsic value is $54.44, and it closed on Friday at $59.80. Thus there is a 9.8% premium in the pfd (although it's really less than that, if one takes the accrued dividend into account. It will go ex-dividend near the middle of this month.)

The yield gap favors the pfd. Its current yield is 6.1% (not including the accrued interest) vs. 4.3% for the common. And the company cannot force a conversion until April 2018, over five years away - and then only if the common stock price exceeds 130% of the conversion price for a period of 20 of 30 consecutive trading days.

I still prefer the preferred to the common for safety reasons and better current yield - albeit with much less liquidity, and with less upside if the common rises (that premium will eventually melt away).

RPT has been a great performer over the past couple of years under the new management team. Those who bought it at or below par are doing very well; I was lucky enough to have done so, and added when the pfd traded well below par for a period of time. I think it's a strong "hold" at the present time.

Ralph
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