Consider Buying B. Riley Financial’s Baby Bonds And Preferred For High Income With Moderate Risk – B. Riley Financial, Inc. (NASDAQ:RILY)

It has been quite a while since I have seen this much red ink in my portfolio. If this isn’t a bear market yet, it certainly looks like one is at our doorstep. For a retired investor who needs a regular flow of dividends and interest, this should be a time of opportunity, not a house of pain, especially if you have held on to some cash to invest. In that case, I’d like to suggest one possible opportunity for your income needs: B. Riley Financial (NASDAQ:RILY), an investment company that’s currently offering several baby bonds, a preferred issue, and common stock all with excellent yields at undervalued prices.

One rule that I have followed when investing for income is to avoid paying more than par (usually $25.00) for baby bonds and preferred stocks. Since many of these have a relatively short time before they can be called, paying more than par will reduce your total yield and even may result in a loss. Always calculate your yield to call if you do decide to pay more than par. has a yield-to-call calculator (Yieldtocall) on their website if you need to calculate this value on any bond or preferred you are considering.

Lately, it has been difficult to find investment-quality issues that are selling below or at par because of the low interest rate environment that we are facing. Simply put, lower yield means higher prices. So, today I was pleased to find these issues that had dropped below the $25 threshold. But, note well, use a limit order if you buy any of these, the prices have varied considerably over the course of one day, and may even be above par by the time you read this. Plus the float on these is very small.

The company recently reported Q4 and 2019 full-year results:

Q4 2019 Highlights:

  • Revenues of $165.2 million vs. $102.0 million for Q4 2018

  • Net income of $16.9 million or $0.59 per diluted share

  • Adjusted EBITDA of $50.3 million vs. $11.2 million for Q4 2018

  • Adjusted net income of $23.6 million or $0.83 per diluted share

FY 2019 Highlights

  • Revenues of $652.1 million vs. $423.0 million for FY 2018

  • Net income of $81.3 million or $2.95 per diluted share

  • Adjusted EBITDA of $207.9 million vs. $89.6 million for FY 2018

  • Adjusted net income of $108.3 million or $3.93 per diluted share

Adjusted EBITDA increased to $50.3 million compared to $11.2 million for the fourth quarter of 2018. For 2019 adjusted EBITDA was $207,885 million vs. the prior year of $89,631 million. Adjusted net income increased to $23.6 million, or $0.83 per diluted share, compared to $0.7 million, or $0.03 per diluted share, for the fourth quarter of 2018.

Because of improved financial results, the company increased the common stock dividend to .25 from .175 plus a .10 special dividend was declared. The ex-dividend date is March 17.

Related Securities for Parent Company: RILY





B. Riley Financial, 6.375% Senior Notes Due 2/28/2025



B. Riley Financial, 6.50% Senior Notes Due 9/30/2026



B. Riley Financial, 6.75% Senior Notes Due 5/31/2024



B. Riley Financial, 6.875% Dep Shares Ser A Cumulative Perp Preferred Stock



B. Riley Financial, 6.875% Senior Notes due 9/30/2023



B. Riley Financial, 7.25% Senior Notes Due 12/31/2027



B. Riley Financial, 7.375% Senior Notes Due 5/31/2023



B. Riley Financial, 7.50% Senior Notes Due 5/31/2027



B. Riley Financial, Inc. common


The preferred stock has a very small float – less than 2,500 shares had been issued at the end of 2019, although 1 million shares are available. Don’t use a market order if you decide on this issue.

You also should consider that the bonds are not tax advantaged. These pay interest unlike the preferred or the common that pay dividends that are in the lower tax category.

This company may not be every investor’s cup of tea. It’s a small company and prices will depend upon interest rate market variations. But Ford Equity Research has listed the common as a strong buy, of average quality and with very positive earnings strength and price movement. Total return for the past five years was 73%.

Right now interest rates are very low and bond prices are higher. If rates go up, the bond prices and preferred stocks, which often act like bonds, will go down. But buying baby bonds for less than par at this time could mean a nice capital gain if they are called later on. And if you can buy for less than 25 any of these issues will provide a nice long term yield for years.

Disclosure: I am/we are long RILYZ. 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.

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