Venturing into preferred stock

For years I have known about preferred stocks, but the complexity and mysteries have kept me away. Recently I read an article in which the long-term strategies involved growth companies such as Amazon (AMZN), Apple (AAPL), but also included income stocks like BP (BP). Clustered in the income stocks was a suggestion to buy Ford (F) but not the common shares. Rather the idea was to pickup preferred shares.

I looked into these Ford preferred shares to see what the attraction was. I found that Ford has a couple different choices in the preferred area (F-S & F-A). Upon closer looks I decided that F-A was the correct pick for me. F-A has a coupon rate of 7.50%, however the preferred is selling below the $25 coupon price. When valued based on the market price the yield is actually 8.69%.

The risk is that Ford could buy this back from the market (since it is past its call date), but in that case I would get $25 a share (which is quite a bit more than I paid). On the plus side the maturity date is 2043, so I could in theory keep collecting the yield until that point.

Preferreds seem to be a good way to secure a yield in a slightly easier way than going to the bond market. That said the bond market is quite a bit safer, but in looking at total returns, you get more return for the added risk in preferreds. I would not likely build an entire portfolio of preferreds, but it does seem to be a good way to diversify my high yield stocks. There is certainly no car maker paying a dividend of any sizable amount, but now I am able to get my high yield while broadening my exposure.