Global Partners' Series B Preferred Units: A Stable Yield Opportunity Amid Volatility

In a world of economic uncertainty, investors seeking reliable income streams face a stark choice: accept the meager returns of traditional fixed-income instruments or embrace riskier assets. Global Partners LP's Series B Preferred Units (GLP.PRB) offer a compelling middle ground, combining a robust 9.50% annualized yield with structural protections that have ensured consistent quarterly distributions since their 2021 issuance. This analysis explores why these units merit attention in today's high-rate environment, while addressing their tax complexities and the defensive appeal of their underlying infrastructure.

Distribution Consistency: A Proven Record of Stability

Since their debut in May 2021, the Series B Preferred Units have adhered to a strict quarterly payment schedule, with distributions paid on February 15, May 15, August 15, and November 15. Over the past four years (2022–2025), the units have delivered uninterrupted payouts at a fixed annual rate of 9.50%, translating to $2.375 per unit annually. This consistency is underscored by their cumulative feature: missed distributions must be settled before common unitholders receive any payments.

The recent yield of 9.19% reflects a slight compression due to the units trading at a 3.40% premium to their $25.00 liquidation preference. Despite this, the yield remains compelling compared to 10-year U.S. Treasuries (~3.8%) or investment-grade corporate bonds (~4.2%). Investors should note that the next distribution, payable on August 15, 2025, is already priced into the market.

Tax Implications: Navigating Non-U.S. Investor Challenges

Non-U.S. investors face a critical hurdle: federal withholding tax on dividends. Under Treasury Regulation Section 1.1446-4, non-residents are subject to withholding at the highest applicable effective tax rate plus 10%. For example, if the top U.S. corporate tax rate is 21%, non-U.S. holders could see withholding at 31%. This erodes the effective yield, though it may be offset by the units' premium pricing and tax treaties.

Investors in this category should:
- Consult tax advisors to explore mitigation strategies.
- Factor in post-tax returns: A 9.19% yield taxed at 31% still leaves a 6.35% return, superior to many alternatives.
- Consider holding via tax-advantaged accounts where possible.

Role in a High-Interest-Rate Environment

Preferred units like GLP.PRB thrive in environments where interest rates are elevated and volatile. Their fixed-rate structure shields investors from refinancing risks, as Global Partners has no obligation to repay the units until the 2026 call date. Even if rates rise further, the 9.50% coupon remains intact—a stark contrast to floating-rate securities or variable-income stocks.

Moreover, the partnership's Northeast energy infrastructure—spanning 180+ retail fuel locations, terminals, and storage facilities—anchors its cash flow. This geographic concentration in a high-demand region reduces reliance on volatile commodity prices, as operations are largely fee-based or tied to regulated markets.

Investment Considerations: Risks and Rewards

• Call Risk: The units are callable at $25.00 per unit starting May 15, 2026. If redeemed, holders may face reinvestment challenges in a lower-rate environment.
• Premium Pricing: The current $25.85 price means capital appreciation potential is limited, but downside protection is strong given the fixed $25.00 liquidation preference.
• Defensive Profile: Their perpetual nature and cumulative dividends make them a low-volatility income anchor for portfolios, especially amid equity market turbulence.

Conclusion: A Defensive Income Play for Diversified Portfolios

Global Partners' Series B Preferred Units offer a rare combination: a sub-10% yield in an era of high rates, structural protections against payment defaults, and an underappreciated asset in a resilient Northeast energy network. While non-U.S. investors must account for tax complexities, the units' stability justifies inclusion in income-focused allocations.

For conservative investors seeking to hedge against market volatility, GLP.PRB presents an attractive option—provided they monitor the 2026 call date and remain mindful of tax implications. In a world of fleeting certainties, this instrument delivers a rare blend of predictability and reward.