Morgan Stanley Preferred Series F: A High-Yield Opportunity Amid Stable Banking Earnings

In a world where traditional fixed-income yields are languishing, Morgan Stanley’s Series F Preferred Stock (MS.PF) emerges as a standout income play. Offering a 6.95% annual dividend yield at current prices, this security combines the stability of a major bank’s capital strength with the predictable payouts of preferred equity. For income-focused investors weary of sub-2% Treasury yields, MS.PF presents a compelling alternative—but timing and risk awareness are critical.

The Dividend: A Steady Anchor in Volatile Markets

The Series F Preferred Stock delivers a $0.4345 quarterly dividend per depositary share, translating to $1.738 annually. At its liquidation value of $25 per depositary share—a key benchmark for pricing—this equates to a 6.95% yield, far outpacing the paltry returns of 10-year Treasuries (~2.8%) or corporate bonds. While preferred stocks carry more risk than government debt, MS.PF’s structure mitigates some volatility, as dividends are paid before common stock dividends and the security ranks above equities in liquidation.

Why Morgan Stanley’s Dividend Is Sustainable

Critics may question whether banks can maintain high dividend payouts amid economic uncertainty. Yet Morgan Stanley’s fundamentals argue otherwise:
- Capital Ratios: The bank’s Common Equity Tier 1 (CET1) ratio stood at 14.4% as of Q1 2025, comfortably above regulatory requirements and signaling ample capital buffers.
- Earnings Resilience: Post-pandemic, Morgan Stanley has navigated market volatility with steady revenue growth, particularly in its wealth management and investment banking divisions.
- Preferred Dividend Track Record: Despite the floating-rate structure tied to LIBOR + 3.94% (now SOFR-based), Morgan Stanley has consistently paid its Series F dividends since issuance, with no skipped payments to date.

The non-cumulative feature means missed dividends aren’t owed—a risk—but Morgan Stanley’s financial discipline and access to capital markets reduce this concern.

Risk vs. Reward: Navigating Bank-Specific Challenges

No investment is risk-free. Key considerations for MS.PF:
- Interest Rate Sensitivity: Preferred stocks often decline in value when rates rise, as their fixed payouts become less attractive. However, the floating-rate structure of Series F after 2024 could shield it from prolonged rate hikes.
- Bank-Specific Risks: A deterioration in Morgan Stanley’s creditworthiness—or broader banking sector instability—could pressure the stock price. However, its status as a Systemically Important Financial Institution (SIFI) with strong liquidity reserves provides a safety net.
- Call Risk: The shares are callable at $25 starting January 2024, meaning Morgan Stanley could redeem them early if rates fall. Investors should monitor call likelihood but note that current rates (~5%) make this scenario unlikely.

Timing the Purchase: Ex-Dividend Strategy

The next dividend payment of $0.4345 per share is set for July 15, 2025, payable to shareholders of record by June 30, 2025. To secure this payout, investors must buy the stock before the ex-dividend date—typically two trading days prior. Missing this window means waiting until October for the next distribution.

Building Income with Portfolio Diversification

Preferred stocks occupy a unique niche: senior to common equity but junior to bonds. For investors overexposed to equities, MS.PF can reduce portfolio volatility while boosting income. Pair it with high-quality corporate bonds or dividend-paying ETFs to balance risk and yield.

Final Take: A Strategic High-Yield Bet

In a low-yield world, Morgan Stanley’s Series F Preferred Stock offers a rare combination of stability and income. Its 6.95% yield is a lifeline for retirees or income seekers, backed by a bank with fortress-like capital and a track record of dividend discipline. While risks exist—most notably interest rate and bank-specific factors—the security’s call protection and seniority make it a worthy addition to conservative portfolios.

Act now: Secure your position before the ex-dividend date on June 28, 2025, to lock in the July payout. In an era of meager returns, this is income investing at its most compelling.