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Preferred Income Portfolio

The investment objective of TIA's Preferred Income Portfolio (PIP) is three-fold: 1) to provide a taxable fixed income alternative through fixed quarterly dividends, 2) to manage the call protection and duration risk,  and 3) to produce "equity-like" total returns through the superior historical yield spreads to US Government Bonds existing in the preferred stock market.

There are several components in TIA's preferred stock philosophy:

  • High quality marketable preferred stocks (NYSE)
  • Superior historical yield spread to 30 year US Government Bond
  • $25 par value
  • Quarterly dividend payments
  • Less than 5 years call protection

The typical preferred stock portfolio will consist of a diversified portfolio of 20-25 stocks. TIA maintains and monitors diversification guidelines on both a company and industry basis.

For more detail as well as commentary on current conditions, the following newsletters may be of interest:

2017-10-15 PIP Quarterly Update

Posted on November 08, 2017

October 15, 2017 Dear Mr. and Mrs. Smith, I drive a pickup truck. I drove my last pickup 15 years. Toward the end, it started sending me signals that it was going to require more expense to keep it functioning than I was willing to spend, so I traded it off. My new truck has seating for 5, all the luxury you’d like in the cab, and a bed suitable for hauling about anything a suburbanite could ima…

2017-07-15 PIP Quarterly Update

Posted on July 17, 2017

July 15, 2017 Dear Mr. and Mrs. Smith, The Preferred Income Portfolio (PIP) had a very solid second quarter of 2017. Annual income remains between 6% and 7% and even though interest rates rose modestly in the quarter our average security values also increased. 2017 is a transitional year for PIP. We started the year with 12 issues callable in the year. During the first half of the year we had 7…

2017-04-15 PIP Quarterly Update

Posted on April 27, 2017

Dear Mr. and Mrs. Smith, At the risk of sounding like a broken record, the Preferred Income Portfolio (PIP) had an excellent first quarter of 2017. We continue to enjoy between 6% and 7% annual income and this quarter our security values rose over 1% as 30-year US Treasury rates fell modestly in the quarter. PIP remains key to our Bridge to Higher Interest Rates (Bridge) strategy. We focus on hi…

2017-01-15 PIP Quarterly Year End Update

Posted on February 01, 2017

January 15, 2017 Dear Mr. and Mrs. Smith, 2016 marked the eighth year of our Preferred Income Portfolio (PIP). Through those eight years, our investors have enjoyed above-market income and below-market volatility. 2016 started with the stock market dropping about 11% while PIP suffered about a 5% loss. Then it was off to the races with a furious rally into the end of the first quarter, closing w…

2016-10-10 PIP Quarterly Update

Posted on October 25, 2016

October 10, 2016 Dear Mr. and Mrs. Smith: The Preferred Income Portfolio (PIP) had a very active third quarter in 2016.  Standard and Poor (S&P) added a new sector to their S&P 500 index by removing real estate stocks from the financial sector and giving them a sector of their own.  This rebalancing caused an increased demand in Real Estate Investment Trust (REIT) shares as mutual funds …

2016-07-15 PIP Quarterly Update

Posted on July 29, 2016

Dear Mr. and Mrs. Smith, The Preferred Income Portfolio (PIP) continued to perform superbly in the second quarter of 2016. PIP’s current yield of 6.42% remains over 4% than the 30-year US Treasury bond. Over the second quarter, the average share price rose from $26.15 to $26.96 giving us capital appreciation of over 3% before adding the annual income stream of almost 7% In a world of investing v…

2016-01-15 TIA Annual PIP Review

Posted on February 24, 2016

January 15, 2016 Dear Mr. and Mrs. Smith, 2015 marked the seventh year of TIA’s Preferred Income Portfolio (PIP). It was an outstanding year with total returns outperforming other fixed income sectors and the major stock market averages. PIP continued to deliver almost 7% income while its average share price on December 31, 2015 was within a nickel of its December 31, 2014 price. PIP’s stability…

Mr. and Mrs. Smith, TIA developed our Preferred Income Portfolio (PIP) to achieve a fixed income strategy designed to produce superior yields while avoiding the "perpetual maturity" inherent in these securities. We have shared dozens of related articles on preferred stock issues with you. TIA is maybe the only firm to utilize the financial crisis to introduce a "call protection" portfolio. We bel…

2015-02-25 Where to Park Your Cash

Posted on April 20, 2015

Dear Mr. and Mrs. Smith "Where to Park Your Cash" was the title of an article in the Wall Street Journal, dated February 21, 2015, which reviewed the available fixed income alternatives for cash management. The challenge is the current meager returns on these traditional investments. The days of a reasonable return on virtually "risk free" cash investments are just a fond memory. Interest rates …

TO:          Investment Consultants FROM:      Larry K. Pitts, CFA DATE:       August 6, 2014 SUBJECT:  Shorter Call Preferreds vs. Cash Alternatives In a July 2014 article, the Kiplinger letter discussed ways to boost your cash yields.  Here is their encore: “For the four months ending June 13, Juiced-Up Cash delivered $279 -- total return of 0.56% for an annualized gain of 1.68%” on a hyp…

TO:           Investment Consultants FROM:       Larry K. Pitts, CFA DATE:        May 5, 2014 SUBJECT:   Preferred Income Portfolios The purpose of this e-mail is to discuss our different preferred stock portfolios.  The Preferred Income Portfolio (PIP) is our benchmark portfolio with 31 issues and 41 months of call protection.  PIP is e-mailed to you every Monday with its Friday closing s…

TO:            Investments Consultants FROM:       Larry K. Pitts, CFA DATE:        February 21, 2014 SUBJECT:  7% Income Return “Forever” The purpose of this e-mail is to discuss the current yield of our Preferred Income Portfolio (PIP).  Our investment strategy is to only own preferred issues with a coupon rate greater than 6.50%.  Since 2002 all preferred issues with a coupon higher than …

TO:                 Investments Consultants FROM:           Larry K. Pitts, CFA DATE:            December 31, 2013 SUBJECT:     What’s Wrong With REITS, Anyway?  The purpose of this e-mail is to review the REIT article which appeared in the December 20, 2013 Wall Street Journal.  The negative performance of REIT preferred stocks has also negatively impacted our Preferred Income Portfolio (PI…

2013-12-31 TIA PIP Annual Letter

Posted on August 26, 2014

December 31, 2013 Dear Mr. and Mrs. Jack Smith, This is our 2013 annual client letter for our Preferred Income Portfolio (PIP).  We have completed our fifth full year with this fixed income portfolio.  In the fourth quarter of 2008, TIA introduced this portfolio as a fixed income alternative to common stocks.  Preferreds were selling at deep discounts to their $25 par value with double-digit yie…

Preferred Income Portfolio, Inaugural Quarterly letter This inaugural quarterly letter is exclusively for our Preferred Income Portfolio (PIP) clients. We are completing our fifth year of PIP. It was developed as the only attractive fixed income alternative to common stocks. We have been bullish on the stock market and bearish on bonds for the past decade. One of your exhibits is our quarterly al…

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