Investor Trap: 8% Current Yield From PEB Is Not Worth The Risk

Summary Pebblebrook Hotel Trust offers preferred stocks with yields above 8%, but risk-adjusted returns are less compelling versus sector benchmarks. PEB’s preferred spreads to Treasuries have narrowed and now stand roughly one percentage point above safer REITs like PSA, despite higher operational risk. PEB lacks a credit rating and operates in the highly cyclical hotel sector, increasing vulnerability to economic shocks compared to investment-grade peers. I recommend avoiding PEB’s preferreds in favor of safer alternatives like PSAs, which offer similar yields with superior credit quality. I do much more than just articles at Trade With Beta: Members get access to model portfolios, regular updates, a chat room, and more. Learn More » Klaus Vedfelt/DigitalVision via Getty Images In this article, we will examine the hotel REIT Pebblebrook Hotel Trust ( PEB ). We will take a deeper look at the second-quarter earnings and analyze the company's financial instruments. Specifically, the company's preferred stocks, which currently offer a current yield of around This article was written by Arbitrage Trader 15.91K Followers Follow Arbitrage Trader, aka Denislav Iliev has been day trading for 15+ years and leads a team of 40 analysts. They identify mispriced investments in fixed-income and closed-end funds based on simple-to-understand financial logic. Denislav leads the investing group Trade With Beta, features of the service include: frequent picks for mispriced preferred stocks and baby bonds, weekly reviews of 1200+ equities, IPO previews, hedging strategies, an actively managed portfolio, and chat for discussion. Learn more. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.