Gladstone Land Preferred Stock (LANDM)

[BMK]

This is a very interesting instrument.

Dividend of $1.25 per year = 5.00% coupon. Dividends are paid monthly.

There is a mandatory redemption date of 01/31/2026.

Currently trading at about $24.20, which gives it a yield to call that is north of 7%.

But there is a clause that says that if Gladstone does not redeem the shares, then the dividend increases to $2.00 per share. This effectively increases the coupon rate to 8.00%.

I've attached the term sheet and a well-written article from Seeking Alpha.

 

[maxinger]

This is a very interesting instrument.

Dividend of $1.25 per year = 5.00% coupon. Dividends are paid monthly.

There is a mandatory redemption date of 01/31/2026.

Currently trading at about $24.20, which gives it a yield to call that is north of 7%.

But there is a clause that says that if Gladstone does not redeem the shares, then the dividend increases to $2.00 per share. This effectively increases the coupon rate to 8.00%.

I've attached the term sheet and a well-written article from Seeking Alpha.

Why is the volume almost zero?

 

[BMK]

Why is the volume almost zero?

I'm not sure that's all that unusual with this kind of esoteric instrument. Preferred stock with a mandatory redemption, sometimes called term preferred stock, is rare. People just don't know about it, or they don't understand it.

Or maybe the fact that it has a "mandatory" redemption date, but it's not really mandatory, renders it too kinky and unacceptable for many types of institutional accounts and funds.

SPLP.PR.A is another example of a term preferred stock, but it does not have an escape clause with a higher dividend. The redemption is required, and the company can choose whether to redeem in cash or for $25 worth of common stock. It also has very low volume.

The uncertain outcome makes it too weird for many investors. Extra variables make it hard to price it, and it doesn't fit neatly into models and algorithms.

 

[maxinger]

Trading is already very difficult.
The success rate is around 1%.

You make it even more difficult by trading stocks with almost zero volume
and those complex, difficult-to-comprehend dividends, preferences, sweeteners and those things.
The success rate will be around 0.1%.

 

[BMK]

Q. Why is the volume low?

A. 'Cause no one is buying or selling it.

Q. Why is no one buying or selling it?

A. 'Cause the volume is low.