Equitable Holdings Preferred Shares: A Hidden Gem in the Income Landscape

The preferred shares of Equitable Holdings (EQH) are currently offering yields that far exceed their coupon rates, creating a compelling income opportunity for investors. Despite trading at steep discounts to their liquidation preferences, these securities are backed by a company with robust financials, a history of consistent dividend payments, and a fortress-like balance sheet. For income-focused investors willing to look beyond headline yields, EQH's preferred shares present a rare blend of stability and reward.

### The Yield Gap: A Disconnect with Fundamental Strength
Equitable's preferred shares, particularly its Series A (EQH.PRA) and Series C (EQH.PRC), are currently yielding 6.67% and 6.52%, respectively—both significantly above their original coupon rates of 5.25% and 4.30%. This gap arises from recent market pricing, where the Series A trades at $19.68 (a 21.3% discount to its $25 liquidation value) and the Series C trades at $16.50 (a 34% discount). These discounts imply the market is pricing in risk, but Equitable's fundamentals suggest that risk is overstated.

### Equitable's Financial Fortitude
Equitable's balance sheet is a pillar of stability. As of March 2025, the company held $127.1 billion in total investments and cash equivalents, dwarfing its long-term debt of just $4.3 billion. Its core operations—spanning retirement services, investment management, and wealth management—generate steady cash flows, enabling it to fund not only its preferred dividends but also a recently increased common stock dividend of $0.27 per share.

The company's preferred shares are noncumulative, meaning missed dividends aren't owed to holders. However, Equitable has consistently paid these dividends since issuance, with no defaults in its history. This track record, combined with its ample liquidity, reduces the risk of dividend cuts.

### Why the Disconnect? Market Myopia or Value Opportunity?
The high yields reflect broader market skepticism toward preferred stocks in a rising rate environment. Investors often penalize fixed-income securities when rates rise, leading to price declines. However, Equitable's preferred shares are trading at discounts deeper than the sector average, even as the company's credit metrics remain strong.



### The Investment Case: Income and Stability
For income investors, the current yields on EQH.PRA and EQH.PRC offer a compelling entry point. A $19.68 price for the Series A delivers a 6.67% yield—meaning an annualized dividend of $1.31 per share. Similarly, the Series C's $16.50 price provides a 6.52% yield. Both rates outpace the broader preferred stock market average and rival high-yield bonds without the added credit risk.

Moreover, these preferred shares offer liquidity advantages over many fixed-income alternatives. Their perpetual structure means no maturity date, and their subordination to debt is offset by Equitable's conservative leverage. Should rates stabilize or decline, the discounts to liquidation value could narrow, unlocking capital gains potential.

### Risks to Consider
- Noncumulative Dividends: While Equitable has a history of paying, no dividends are guaranteed.
- Interest Rate Sensitivity: Rising rates could further pressure preferred stock prices, though yields are already high enough to offset moderate rate hikes.
- Sector Sentiment: Financial stocks face macroeconomic headwinds, such as economic slowdowns or regulatory changes.

### Conclusion: A Buy for Income-Seekers
Equitable's preferred shares are a rare example of market pessimism clashing with corporate reality. The yields on EQH.PRA and EQH.PRC are pricing in risks that don't align with the company's financial strength. For investors prioritizing steady income and capital preservation, these securities offer an attractive entry point.

Recommendation:
- Buy EQH.PRA for its 6.67% yield and manageable discount to liquidation.
- Consider EQH.PRC for its higher 6.52% yield, though its deeper discount reflects greater market skepticism—potentially rewarding contrarian investors.

Both securities are suitable for conservative portfolios seeking to boost yields without overexposure to equity volatility. In a low-yield world, Equitable's preferred shares are a hidden gem worth adding to income-focused allocations.