Morning Commentary: Preferreds firm going into weekend; Vanguard rises as common distribution cut

By Stephanie N. Rotondo

Seattle, Dec. 18 – Preferred stocks were edging higher in early Friday trading.

The Wells Fargo Hybrid and Preferred Securities index was up 8 basis points at mid-morning.

However, a trader said that activity was muted.

“I think everyone must have had holiday parties because nobody is around,” he said.

Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) were inching up after the company announced it had reduced the distribution on its common units, while maintaining the preferred units.

“The preferreds should jump because they are conserving cash,” a trader said.

The units were up $1.33, or 17.66%, at $8.86.

In fact, the company said that in lowering the common distribution, it will save nearly $140 million a year. Those funds will then be used to pay down debt.

“We believe it is in the best long-term interest of the company to redirect our excess cash flow in this manner and better position Vanguard when a commodity price recovery occurs in the future,” said Scott W. Smith, president and chief executive officer, in a statement.

Though the primary market was radio silent, a trader said buzz about next year’s calendar was already starting.

“I am hearing rumors of a JPMorgan [Chase & Co.] deal after the first of the year,” he said.

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