Athene Holding Ltd.'s 7.75% Preferred E: A High-Yield Oasis in a Rising Rate World

As the Federal Reserve's rate outlook remains uncertain and income investors scramble for yield, Athene Holding Ltd.'s 7.75% Fixed-Rate Reset Preferred Stock (Series E) emerges as a compelling defensive play. With a dividend yield of 7.75%—among the highest in the annuity-backed preferred sector—the security offers a rare combination of stability and income potential. But does Athene's capital structure and annuity-driven cash flows support this payout in a volatile rate environment? Let's dissect the opportunity.

The Foundation: Athene's Bulletproof Capital Structure

Athene's capital stack is designed for resilience. As of Q1 2025, the firm boasts $49.9 billion in liquid assets, $8.4 billion in cash, and a $2.6 billion liquidity facility—buffers that far exceed the $2.9 billion in untapped leverage capacity. This liquidity creates a safety net for its $315 billion in total net assets, ensuring it can weather interest rate fluctuations while maintaining dividend discipline.

The Series E preferred stock (ticker: ATHPrE) sits atop this fortress. Its fixed-rate structure (7.75% annually) is non-cumulative, meaning missed payments won't derail common shareholders. But with Athene's consistent dividend track record—every Series E payout since issuance has been met—the risk of a skip is negligible. The company's Q2 2025 dividend declaration, set for June 30, reinforces this reliability.

Annuities as the Engine of Cash Flow

Athene's core business—retirement solutions—fuels its preferred dividends. U.S. annuity sales hit $105.4 billion in Q1 2025, with indexed annuities (RILAs/FIAs) accounting for 44% of sales. These products lock in policyholders' premiums for decades, generating steady cash flows. Athene's $380 billion in total assets (as of March 2025) are largely invested in high-quality bonds and structured notes, providing predictable income streams to fund dividends.

Crucially, the Series E's fixed-rate reset feature (every five years) allows Athene to recalibrate payouts if rates drop. In a Fed easing scenario—now priced at 60% likelihood by mid-2025—the stock could see price appreciation as yields compress, adding to total returns.

Outperforming Peers in a Yield-Starved Market

While competitors like Voya Financial (VOYA) are yielding just 5.5% on its Series B preferred, Athene's 7.75% payout offers superior income. Voya's stock trades at a 10.9% discount to liquidation value, compared to Athene's tighter spreads. The gap widens when considering Athene's stronger balance sheet: its $49.9 billion liquid portfolio vs. Voya's constrained capital reserves.

Even in a worst-case scenario where rates rise further, Athene's $3.5 billion undrawn credit facility at ACRA and 30% leverage cap (vs. regulatory thresholds) ensure flexibility.

The Fed's Crossroads: Why Now is the Time to Act

The Federal Reserve's May 2025 meeting held rates steady at 4.5%, but market pricing suggests a 50% chance of a cut by year-end. This uncertainty creates a “sweet spot” for preferred stocks like ATHPrE:

• If rates stabilize: The fixed 7.75% yield becomes a standout income source, with price appreciation potential.
• If rates fall: The reset feature could lower Athene's cost of capital, boosting future dividends.
• If rates rise modestly: Athene's long-duration assets (e.g., 30-year bonds) will outperform shorter-term peers, shielding income.

The Bottom Line: A 2025 Must-Own

Athene's Series E preferred stock combines high yield, dividend safety, and rate-resilient cash flows to form a rare income opportunity. With a yield that's 40% higher than the sector average and a fortress balance sheet, it's a defensive play for portfolios in an era of economic uncertainty.

Action Item: Buy ATHPrE now. The stock trades at a 2.5% discount to its $25 liquidation value, offering both income and capital upside. For income investors, this is one of the few places left to earn 7.75% without taking excessive risk.

The article was written on May 23, 2025.