Interest continued to gather in February, and the portfolio is set to receive its first dividend from the preferred stock portion of the portfolio in March, yay! However, due to volatility in the preferred stock portion of the portfolio, the portfolio's value declined by 1.52% for the month.
But this is good news! Lower prices push the yields of preferred stocks up, as they pay fixed dividends to shareholders. If a preferred stock pays $1 in total dividends per year, and you buy shares at $25, that amounts to an annual dividend yield of 4% (1 ÷ 25 x 100 = 4%). But, if the price of the preferred stock falls to $20, the yield rises to 5% (1 ÷ 20 x 100 = 5%), wowie!
So, the lower the price, the better the yield, the higher our long-term returns! Check out my article on preferred stocks to get a better idea on how to invest in them yourself :).
Portfolio Activity
Per usual, I added a cheeky $250 to the portfolio at the start of March. I took that cheeky sum and invested it to double the portfolio's position in Great-West Life Co's 5.4% Series P Non-Cumulative Preferred Shares (TSX:GWO.PR.P) at a price of $21.92 per share. Our purchase was 80 cents cheaper than our original purchase of $22.72 per share in February.
Since the preferred stock pays a quarterly dividend of $0.338, for total dividend payments of $1.35 per year, at a purchase price of $21.92, my annual dividend yield on the purchase was 6.16% ($1.35 dividend ÷ $21.92 purchase price x 100 = 6.16%). The higher yield compares favorably to the 5.94% of our first purchase, which brings the average yield on the position to 6.05%, hooray!
As of March 1st, the portfolio's value sat at $2,729.25 with a projected annual income of $148.90, and an annual yield of 5.41%! This compares favorably to the $134.05 in annual income reported in February, and an improvement of 0.09% above February's yield of 5.32%.
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