Regions Financial's Preferred C: Steady Dividends in a Changing Rate World

Regions Financial Corp's Series C Preferred Stock (RF.PRC) has emerged as a standout income vehicle in recent years, offering investors a reliable 5.81% yield amid shifting monetary policy. With its dividend history intact since 2021 and a smooth transition from LIBOR to SOFR, this security provides a compelling option for those seeking stability in a volatile rate environment.

Dividend Discipline: A Track Record of Consistency

RF.PRC has paid a quarterly dividend of $0.35625 per depositary share since its 2021 debut, totaling $1.425 annually. This consistency is notable for a non-cumulative preferred stock, which typically carries the risk of skipped payments. Yet Regions has never wavered, issuing payments on February 15, May 15, August 15, and November 15 each year without exception. The fixed-to-floating structure—5.700% until August 2029—ensures predictable cash flows for the next four years, shielding investors from near-term rate volatility.

LIBOR Transition: Smooth Sailing with SOFR

The shift from LIBOR to SOFR, finalized in mid-2023, raised concerns about payout dilution for legacy preferred stocks. However, RF.PRC's terms were amended to replace three-month LIBOR with the CME Term SOFR—plus a 0.26161% spread adjustment—ensuring continuity. This adjustment, mandated by regulators, was designed to mirror the pre-2023 rate structure, meaning dividends will remain at 5.700% until 2029. Post-2029, the floating rate will be SOFR + 3.148%, but the current fixed period offers a safe harbor for income-focused investors.

Critically, the transition did not alter the stock's $25 liquidation preference, and its recent price of $24.54 sits at a slight discount to that value. This creates a margin of safety for holders, especially as the stock trades with a 5.81% yield—higher than its original coupon—due to its dip below par.

Creditworthiness: An Anchor in Uncertain Markets

Regions Financial's parent ratings reinforce the security's reliability. Moody's assigns a Baa1 to its senior unsecured debt (upgraded in 2022), while Fitch's A- and S&P's BBB+ reflect strong capitalization and asset quality. The bank's CET1 ratio remains above 9%, and its low-cost deposit base—accounting for over 80% of funding—buffers against rising interest costs. Even Moody's “Negative” outlook for the U.S. banking sector in 2025 doesn't apply here; Regions' conservative underwriting and geographic focus (Southeast U.S.) mitigate exposure to systemic risks.

Why RF.PRC Shines in a Rising Rate World

For income investors, RF.PRC offers three key advantages:
1. Predictability: Fixed dividends until 2029, eliminating uncertainty for those avoiding floating-rate exposure.
2. Yield: A 5.81% payout dwarfs the 4.5% average of the S&P 500 Preferred Stock Index.
3. Safety: Investment-grade ratings and a sub-$25 price provide downside protection.

The stock's perpetual structure adds flexibility, as it has no maturity date, and its non-cumulative terms aren't a drawback here—Regions has prioritized preferred dividends even during post-pandemic stress.

Investment Takeaway

RF.PRC is a rare blend of stability and yield in today's market. While the non-cumulative feature means dividends could theoretically be cut, the bank's strong track record and robust credit metrics make this scenario unlikely. For investors seeking to lock in income without chasing riskier assets, this preferred stock deserves serious consideration.

Action Item: Buy RF.PRC near $24.50 for a 5.8% yield, with a target price of $25. Monitor the bank's quarterly earnings for any shifts in dividend policy or capital management strategies.

In a world where even AAA-rated bonds struggle to keep pace with inflation, Regions Financial's Series C Preferred Stock stands out as a reliable income generator—and a testament to disciplined dividend management in turbulent times.