Yield to call calculator for preferred stocks

METAM: above par, with a call date ahead

METAM, issued by Meta, trades at $49.40. It pays 6.5% on $50.00 par, which is $3.25 a year. Divide the dividend by the price and the current yield is 6.58%. The first call date is August 15, 2029.

Because the shares cost less than par, a call at $50.00 would return $0.60 a share more than the buyer paid. That gain lifts the yield to call to 6.98%. The worst case is that the issuer never calls and the buyer keeps the current yield, 6.58%.

BEP-A: below par, and the issuer can call at any time

BEP-A, issued by Brookfield Renewable Partners, trades at $17.03. It pays 5.25% on $25.00 par, which is $1.31 a year. Divide the dividend by the price and the current yield is 7.71%. The issuer can call the shares at any time, so the example assumes a call in about 3 months.

Because the shares cost less than par, a call at $25.00 would return $7.98 a share more than the buyer paid. The sooner the call comes, the larger that gain is as a share of the price. The worst case is that the issuer never calls and the buyer keeps the current yield, 7.71%.

The figures come from the public record pages for METAM and BEP-A. Prices are 15 minutes delayed and refresh every hour. The yield to call is a bond-equivalent yield, the same figure the record page shows. Nothing on this page is investment advice or a recommendation to buy, sell or hold.

A preferred stock pays a fixed dividend on a fixed par value, usually $25 a share, but it trades at a price that moves. From the first call date on, the issuer can buy the shares back at par. That gives three ways to measure the return. The current yield is the dividend divided by today’s price, and it assumes nothing changes. The yield to call also counts the move from today’s price to par on the call date, a gain if you bought below par and a loss if you bought above it. The yield to worst is the lower of the yield to call and the return if the issuer never calls. It is the number to rely on, because it assumes nothing goes the buyer’s way.

If the issuer never calls, the return is the current yield for a preferred with no maturity date, or the yield to maturity for a baby bond or a preferred that has one. That is why the yield to worst calculator asks for a maturity.

• Dividend that has built up since the last payment. Preferred stocks trade flat, so part of today’s price is dividend already earned. The app’s version reads that amount from the record.
• A call before the first call date, which the terms do not allow. After that date, the issuer can call on any payment date.
• Tax. The after-tax yield calculator covers that.
• Whether the issuer can keep paying. The record page and the Income Quality Score cover that.

In the app, the same calculator fills in the price, coupon, par value and every call date for any ticker, reads the built-up dividend, and shows what happens if the call comes later. Open METAM in the app’s calculator. It comes with the free Starter plan.