Morgan Stanley: 7%+ On The New Preferred Is Attractive

Morgan Stanley (MS) is in the market today with a new preferred stock issue.

Morgan Stanley, a bank holding company, provides diversified financial services on a worldwide basis. The Company operates a global securities business which serves individual and institutional investors and investment banking clients. Morgan Stanley also operates a global asset management business.

The details are (from the prospectus):

Issuer	Morgan Stanley
Size	$250,000,000
Series/Ticker	Series E - MSPrE (expected)
Rating	Ba3/BB+/BB/BBB (Moody's/S&P/Fitch/DBRS)- expected
Rate Type	Fixed to float
Rate	7% plus (closer to 7.25%). Floats after 10/15/2023 at 3mo LIBOR +
Maturity	Perpetual
Optional Redemption	10/15/2023
Cumulative	NO
Tax Treatment	DRD/QDI

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In order to discern if there is value (and pricing) a look at their existing preferreds is in order:

(click to enlarge)

The new issue is attractive relative to existing Morgan Stanley and Morgan Stanley Capital Trust issues. Now we must evaluate it versus peers Goldman Sachs (GS), Citigroup (C) and JPMorgan (JPM):

(click to enlarge)

As the above table shows, the new Morgan Stanley is attractive relative to peers as well.

And finally, an equity snapshot to show equity market thoughts on the ! peer group:

MS data by YCharts

From an equity standpoint, Morgan Stanley has been favored by investors and has rewarded their owners more in the last year.

Bottom Line: The new Morgan Stanley preferred stock issue is attractive versus their existing preferred stock (and hybrid) issues and should be considered for income focused portfolios. It must be noted that as the preferred is perpetual (or at a minimum 10 years), it will be significantly impacted by future interest rate movements as well as company specific events.

Source: Morgan Stanley: 7%+ On The New Preferred Is Attractive

Disclosure: I am long C. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: This article is for informational purposes only, it is not a recommendation to buy or sell any security and is strictly the opinion of Rubicon Associates LLC. Every investor is strongly encouraged to do their own research prior to investing.