Great question. The answer depends mostly on what sort of investor considers adding preferred shares. Let me take you back in time to 2007 and early 2008; Fannie was struggling to raise capital at the direction of OFHEO (that later became FHFA) and issued a lot of high coupon preferred stocks in series like FNMAS and FNMAT. These shares were snapped up by conservative investors like thrifts and insurance companies because of their presumed safety and high dividend yield. This is the same investment crowd that is drawn to Treasury bills, bonds and, yes, utility stocks. This class of investor is HUGE and is, in fact, substantially larger than the typical stock traders you would expect to find here on investors hub. This group of legacy investors includes many of the parties who have filed suit as litigating shareholders.
For investors seeking yield and relative safety, if the dividends get restored and capital formation is limited, especially if government restores FNMA's original $45 B buffer that Treasury helped vaporize, then FNMA preferreds will be a good investment, even if purchased at or near par levels. But if you buy them NOW while the S/P's are at around 20-25% of par, your dividend rate of return on a 8.75% series like FNMAT or FNMAS delivers a yield of more like 35%. That is a GREAT investment if you have the confidence that RRR is coming and you are a buy-and-hold type of investor like Warren Buffett.
I'm not making a recommendation, here, just explaining that certain sorts of investors would find junior preferred shares a wise choice while others seeking share price elevation would likely stay the course with common stock.
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