JPMorgan's Preferred Stock: High Yield and Discount Offer Income Potential – But Watch the Clock

Investors seeking steady income and capital appreciation may find JPMorgan Chase's Series LL preferred stock (JPM.PRL) an intriguing option. Trading at a 19.68% discount to its $25 liquidation preference and offering a 5.76% current yield, this non-cumulative preferred stock presents a compelling opportunity. However, its risks—including callability starting in June 2026 and the non-cumulative dividend structure—demand careful consideration. Here's what income-focused investors should know.

The Attractive Valuation: Discount and Yield

As of July 14, 2025, JPM.PRL trades at $20.08, a $4.92 discount to its $25 liquidation value. This 19.68% discount stems from market concerns about redemption risks and interest rate fluctuations. The discount, however, creates two opportunities: capital gains potential if the stock is called at par in 2026, and a 5.76% current yield, which is significantly higher than its original coupon rate of 4.625%. The elevated yield arises directly from the stock's below-par price: its annualized dividend of $1.1563 translates to a higher percentage return when divided by the current market price.

Strength in the Backing: JPMorgan's Financial Fortitude

JPMorgan's Series LL preferred stock benefits from the firm's $4.6 trillion in assets and $357 billion in stockholders' equity as of June 2025. This robust capital position underpins the reliability of its dividend payments. The bank has consistently declared dividends across its preferred series, including Series LL, even during market volatility. For income investors, this stability is a key advantage, especially as the Federal Reserve considers rate cuts, which could pressure preferred stock yields downward. Holding JPM.PRL now locks in a relatively high yield in a potentially lower-rate environment.

Risks to Consider: Non-Cumulative Dividends and Callability

While the yield and discount are enticing, two risks temper the optimism:

1. Non-Cumulative Dividends: Unlike cumulative preferred stocks, missed payments on JPM.PRL are not owed to shareholders. If JPMorgan suspends dividends—a rare but possible scenario—investors lose out on income with no guarantee of catch-up payments. This feature adds risk compared to cumulative preferreds.

2. Redemption Risk: The stock becomes callable starting June 1, 2026, at par ($25 per share). If called, investors would realize a 19.68% capital gain, but would then need to reinvest proceeds in a lower-yield environment. Conversely, if JPMorgan does not call the stock, its trading price may remain below liquidation value, diluting the capital appreciation case.

The Investment Case: A Calculated Bet on Income

For income-focused portfolios prioritizing stability, JPM.PRL's 5.76% yield and potential $4.92 capital gain by mid-2026 make it a contender. The discount reflects near-term uncertainty, but the likelihood of JPMorgan redeeming the stock at par—as it often does with preferreds—supports the bullish thesis.

When to Buy, Hold, or Sell

• Buy: Now, for investors comfortable with the call and dividend risks. The yield offers a competitive income stream, and the discount provides a margin of safety.
• Hold: Until at least June 2026 to capture the call premium. Monitor JPMorgan's redemption announcements closely.
• Sell: If the stock approaches $25 pre-call (reducing the discount) or if JPMorgan signals it will not redeem the issue.

Final Recommendation

JPM.PRL is a high-yield, moderate-risk play for income portfolios. Its 5.76% yield and 19.68% discount offer a rare blend of income and capital appreciation potential, backed by JPMorgan's financial strength. However, investors must acknowledge the risks: non-cumulative dividends and the looming call date. For those willing to hold until 2026 and monitor redemption signals, this preferred stock could be a rewarding addition to a diversified income strategy.