Summary
- Overview of Morgan Stanley's new preferred stock - MS-L.
- A brief look at the company.
- Where in the context of all securities, issued by Morgan Stanley, does MS-L stand?
- Comparison with the sector.
- A comparison with the other below investment-grade preferred stocks that pay a fixed interest rate.
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Introduction
Our goal is to present to you our IPO analysis for every new fixed-income security that enters the market and to find out if there is any trading potential. In this article, we want to shed light on the newest Preferred Stock issued by Morgan Stanley (MS). Even though the product may not be of interest to us and our financial objectives, it definitely is worth taking a look at.
The New Issue
Before we submerge into our brief analysis, here is a link to the 424B2 Filing by Morgan Stanley - the prospectus.
Source: SEC.gov
For a total of 20M shares issued, the total gross proceeds to the company are $500M. You can find some relevant information about the new preferred stock in the table below:
Source: Author's spreadsheet
Morgan Stanley 4.875% Non-Cumulative Preferred Stock Series L (MS-L) pays a qualified fixed dividend at a rate of 4.875%. The new preferred stock has a "BB+" Standard & Poor's rating and is callable as of 01/15/2025. Currently, the new issue trades at its PAR at a price of $24.98 and has a 4.88% Current Yield and YTC of 5.04%
Here is how the stock's YTC curve looks like right now:
Source: Author's spreadsheet
The Company
Morgan Stanley is a financial holding company. The Company's segments include Institutional Securities, Wealth Management and Investment Management. The Company's Institutional Securities business segment provides investment banking, sales and trading, and other services to corporations, governments, financial institutions and high-to-ultra high net worth clients. The Company's Wealth Management business segment provides an array of financial services and solutions to individual investors and small-to-medium sized businesses and institutions covering brokerage and investment advisory services, market-making activities in fixed income securities, financial and wealth planning services, annuity and insurance products, credit and other lending products, banking and retirement plan services. The Company's Investment Management business segment provides a range of investment strategies and products.
Source: Reuters.com | Morgan Stanley
Below, you can see a price chart of the common stock, MS:
Source: Tradingview.com
The company is constantly increasing its dividend on the common stock, from $0.20 in 2013 to $1.10 in 2018. For 2019, the common stock is expected to have paid ? $1.30 yearly dividend. With a market price of $49.36, the current yield of MS is at 2.63%. As an absolute value, this means it pays $2.16B in dividends yearly. For comparison, the yearly dividend expenses for all preferred stocks of the company (including the newly issued Series L Preferred Stock) are around $525M.
In addition, with a market capitalization of around $81B, MS is rivaling with Goldman Sachs (GS) for the largest "Investment Brokerage" company in the US (according to Finviz.com).
