Banks Find New Way to Squeeze Investors: Street Whispers
General Electric (GE) subsidiary GE Capital in June issued $2.25 billion in subordinated noncumulative preferred stock paying a fixed-rate of 7.125% until June 15, 2022, after which the shares will pay a floating rate, based on three-month Libor plus 529.6 basis points. That's a beautiful deal, with one catch: The minimum investment is $100,000.
GE Capital in July issued another $1.75 billion in subordinated noncumulative preferred -- again priced at $100,000 a share -- paying a fixed 6.25% until December 15, 2022, after which the shares will pay three-month Libor plus 470 basis points. This deal perfectly illustrates the dramatic and painful change in the market for fixed rate paper over the course of a month.
Another quality direction you may choose is energy limited partnership shares. Two lovely examples are Kinder Morgan Energy Partners, LP (KMP) and AmeriGas Partners LP (APU) .
KMP is mainly a gas pipeline operator. The partnership shares have a yield of 6.15%, based on the most recently quarterly distribution of $1.23 and Tuesday's closing price of $80.03.
Kinder Morgan Energy Partners has had a very strong track record for dividend increases over the past several years, and the stock's five-year chart is rather lovely, showing plenty of growth on top of the income:
AmeriGas is a domestic propane distributor. The partnership shares have a yield of 7.58%, based on the most recent quarterly distribution of 80 cents, and Tuesday's closing price of $42.19. Like KMP, APU has been a winner over the past five years:
Of course, these are two extreme examples of income-oriented investments that have also brought home strong growth returns for investors.