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Author: tjberko One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Re: buy/write IBKR if interested Date: 7/27/2014 12:05 AM
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I see this is callable anytime. What are the chances this could be called in the next 1 or 2 Quarters. I am just too lazy to go through all the financials and would just take your opinion. :)

UBP-D has been callable for over 4 years, and has not been called. Even when the 10 year yield was 1.6% they did not call this preferred, so why would they call it now in a higher interest rate environment. Additionally UBP-D is only selling at 20 cents over par so what can you lose. You will get a partial dividend if it is called in the near future and that partial dividend may well be higher than 20 cents.

You can see how cheap UBP-D is by comparing it to UBP-F which is not yet callable. UBP-F has a yield to call of 6.3%. A 6.3% yield on UBP-D would price the preferred at $29.75 per share. If UBP-D was not callable, this is the price that UBP-D would trade around, so you are getting an enormous price discount simply because of a very slight call risk which will cost you nothing if it happens. I have a massive position in UBP-D because at $25.20 the downside risk is extremely small relative to all other preferred stocks with good credit quality. If suddenly investors want a 7.6% yield from a UBP preferred, UBP-D will fall to 24.65 for a 55 cent loss, while UBP-F will fall from 25.60 to to 23.40 for a $2.20 cent loss. This provides great price safety for UBP-D.
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