LNC.PR.D: A Low-Duration Preferred Stock Offering 9% Yield Amid Rising Rates

In a landscape where income generation is increasingly challenging, Lincoln National Corp.'s 9.0% Non-Cumulative Preferred Stock, Series D (NYSE: LNC.PR.D), emerges as a compelling option for qualified dividend seekers. With an annualized dividend yield of 8.47% as of June 2025—near its 9.0% coupon—and an imminent payout on June 1, this security offers a tactical income play while mitigating risks tied to rising interest rates. Let's dissect its advantages and assess its strategic fit for income-focused investors.

Key Features of LNC.PR.D

1. Attractive Yield and Imminent Dividend
The Series D preferred stock delivers a $2.25 annualized dividend per share, paid quarterly. The next payment of $0.5625 per share is due on June 1, 2025, to shareholders of record as of May 15. While the current yield of 8.47% slightly trails its 9% coupon due to the stock's premium price ($26.56 vs. $25 liquidation value), it still outperforms the broader market and many peer preferreds. Investors should note that dividends are qualified, subject to a 20% federal tax rate for those in higher brackets—a key advantage over ordinary income dividends.

2. Non-Cumulative Structure with Consistent Payments
Despite its non-cumulative feature—a risk that missed payments aren't owed—Lincoln Financial has maintained steady quarterly dividends since the Series D's March 2023 launch. This reliability stems from the company's robust capital position, including an RBC ratio exceeding 420% as of Q1 2025, well above regulatory minimums. The non-cumulative clause adds flexibility for the issuer but underscores the importance of monitoring Lincoln's creditworthiness.

3. Low Duration Profile for Rate-Hike Resilience
Preferred stocks are typically sensitive to rising rates, but LNC.PR.D's low duration (unstated but implied by its fixed dividend structure and short-term callability starting December 2027) reduces price volatility. Unlike long-duration bonds, its value won't plummet as sharply if rates climb further, making it a safer income choice in an uncertain rate environment.

Credit Stability: Q1 2025 Results and Strategic Partnerships

Lincoln Financial's Q1 2025 earnings reinforce its ability to sustain dividends. Key metrics include:
- Strong Liquidity: $466M in holding company liquidity, sufficient to meet obligations.
- Improved Book Value: Adjusted book value per share rose to $73.19, excluding volatile items like unrealized securities losses.
- Segment Growth: Annuities sales surged 33%, while Group Protection margins expanded 120 basis points.

The Bain Capital partnership, a $825M investment securing a 9.9% stake, further bolsters credit stability. This alliance provides Lincoln with capital flexibility and access to private assets, reducing reliance on volatile public markets. While risks like macroeconomic sensitivity remain, the partnership signals management's commitment to long-term resilience.

Contrasting with Higher-Duration Preferreds

In a rising rate environment, investors should favor securities with shorter duration profiles to avoid capital erosion. LNC.PR.D's structure—non-cumulative, quarterly payouts, and a 2027 call date—contrasts sharply with longer-maturity preferreds tied to distant maturities. For example, a 30-year preferred stock might see its price drop 15–20% if rates rise 1%, whereas LNC.PR.D's price sensitivity is muted, preserving principal value.

Investment Considerations and Risks

Why Buy?
- Qualified Dividends: Tax efficiency for high-income investors.
- Current Income: Steady cash flow in a low-yield world.
- Credit Strength: Backed by Lincoln's fortress balance sheet and strategic partnerships.

Risks to Monitor
- Non-Cumulative Risk: Dividends depend on board approval.
- Call Risk: Redemption at $25 per share in 2027 could limit upside.
- Market Volatility: The stock's premium to liquidation value may compress if rates rise sharply.

Verdict: A Tactical Income Play

For qualified investors prioritizing current income and liquidity, LNC.PR.D offers a compelling mix of yield, dividend certainty, and rate-hike resilience. Its low duration and Lincoln's financial fortitude make it a superior choice compared to longer-duration preferreds.

Action Items:
- Buy Before May 15: To capture the June 1 dividend.
- Monitor Rate Movements: Consider selling if the stock's premium widens beyond $27, signaling overvaluation.
- Diversify: Pair with short-duration bonds or dividend-paying equities for balanced income exposure.

In conclusion, LNC.PR.D is a disciplined income tool for those navigating today's rate environment. While not without risks, its combination of yield, credit quality, and strategic advantages positions it as a standout pick for dividend-focused portfolios.