Regency Wealth Management

Andy Aran Quoted in U.S. News

Preferred shares have a role in generating income, though, which is the name of the game in retirement.

Andrew Aran, managing partner at Regency Wealth Management in Ramsey, New Jersey, says his firm maintains a modest allocation to preferred shares when it sees an advantage.

“They can offer a superior yield to bonds or stock dividends from the same company,” he says. “We view them as having a seat at the table but only buy them when the value and strength of the issuing company make sense.”

Aran describes one client situation where preferreds were clearly the superior choice: In 2009, a client held some noncallable convertible preferred shares that had been issued at rates over 7%. The underlying common stock price had fallen to such a low level that the preferred shares were unlikely to convert to common shares. When that happens, the convertible is termed “busted,” as it now functions essentially as a bond.

“These are still outstanding and currently yield over 6%,” Aran says.

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