SLM Preferred Stock A

I added a post about preferred stocks some time ago and thought it worthwhile to revisit them. SLM has several outstanding, including 'A' and 'B' shares. The major difference is that 'A' pays a fixed rate, while 'B' is floating, based on LIBOR. The drop in LIBOR the last few months makes the 'A's more attractive, at a price of around $30, the effective return is almost 12%, and the dividend is qualifed, meaning it's taxed at a rate of only 15%. A good tax loss strategy to consider last year if you owned the 'B' was to buy the 'A's to maintain a position, and sell the 'B'. It probably would've worked out since the 'A's have rallied sharply over the last few months from the low 20's, and were as low as $18.75 at one point.

SLM has been able to line up financing and is expected to get support from the Treasury/Fed. Results and estimates suggest SLM should be able to remain cash flow positive, meaning common stock dividends should be maintained, which in turn implies the preferred stock dividends will continue to be declared.