E QTS Realty Trust Preferred A (QTS.PA): A Mispriced Bargain

In the world of preferred stock investing, there is no objective fair value for a particular preferred stock. The spread between the 30-year treasury yield and preferred stock yields can vary greatly depending on investor psychology, current economic strength and the perception of credit risk. When investors/traders exam a preferred stock for investment, all they can do is see how it compares relatively to other comparable preferred stocks. This is primarily what I do in making my fixed income investment/trading choices. I plan to publish a series of articles on relatively mispriced (underpriced) preferred stocks, and I will start in this article with a relatively simple analysis of QTS-PA, a preferred stock recently issued by QTS Realty Trust.

QTS is a data center REIT. It recently IPO'd its first preferred stock, QTS-PA, which has a par (call) price of $25. There is another data center REIT, Digital Realty (symbol DLR), which has issued 5 preferred stocks with call prices of $25 which gives us an opportunity to do a comparison to see if we can find a preferred stock bargain among these preferred stocks. The data in this chart is as of March 24th, 2018.

Stock Symbol       3/24/2018 Price      Dividend      Current Yield        Yield to Call         Call Date

QTS-PA                            25.25                    $1.781              7.05%                    7.1%               3/15/2023

DLR-PC                             26.95                    $1.656              6.12%                    4.0%               5/15/2021

DLR-PG                            24.94                    $1.469               5.90%                Not Useful        4/09/2018

DLR-PH                            26.23                    $1.844              7.04%                    2.38%             3/26/2019

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Disclosure: I am long QTS-PA.

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Barry Hochhauser 1 year ago Member's comment

Good article, got any more?

Alpha Stockman 1 year ago Member's comment

I highly recommend this read.