Brookfield Finance Perpetual Notes: A Misunderstood 'Must Own' Bargain

Preferred Stock Trader Investing Group Follow 5 Share Save Play ( 14min ) Comments (5) Summary Brookfield Corporation is a large “blue chip” A- rated conglomerate with vast diversified holdings that has performed very well over the last 10 years. Brookfield Finance Perpetual Notes are guaranteed by Brookfield Corporation, so they come with great safety and sell at a huge discount to par for potentially large price gains. Interestingly, BNJ pays interest that is classified as a “qualified dividend,” so it generates a huge after-tax yield not seen from any other BBB-rated investment-grade note. For those in marginal tax brackets above 24%, BNJ provides investors with an after-tax yield that is equivalent to a bond/note yielding 9.8% at its price of $14.80. No "qualified dividend" paying preferred stock with the same credit rating as BNJ provides anywhere near as good an after-tax yield as BNJ. BNJ is $3.20 per share undervalued. Looking for a portfolio of ideas like this one? Members of Conservative Income Portfolio get exclusive access to our subscriber-only portfolios. Learn More » tobiasjo/E+ via Getty Images Introduction At our Conservative Income Portfolio service, my role is to identify very undervalued/mispriced preferred stocks and baby bonds. These are often smaller-cap, under-the-radar securities that are often unrated and thus overlooked by investors despite often being quite This article was written by Preferred Stock Trader 9.36K Followers Follow Preferred Stock Trader has 30 years experience investing in preferred stocks and bonds. He utilizes a proprietary screening software researching high yield preferred stocks and bonds that are undervalued relative to securities with similar profiles for high total returns. Preferred Stock Trader contributes to the investing group Conservative Income Portfolio which features investing ideas for undervalued preferred stocks, baby bonds, traditional bonds with the potential for high yield and capital gains. Features of Conservative Income Portfolio include: covered call opportunity portfolio, long term portfolio of stocks and bonds, exclusive articles for members, previews of public articles in advance, macro analysis, and community chat. Learn More. Analyst’s Disclosure: I/we have a beneficial long position in the shares of BNJ either through stock ownership, options, or other derivatives. 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. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.