Public Storage Preferreds Offer Steadier Income Amid JPMorgan's Call Risks: A Yield Spread Analysis

Investors seeking steady income streams may find themselves torn between two high-profile preferred stock options: Public Storage's Series Y (PSA) and JPMorgan Chase's 4.2% Series MM. While both offer fixed-rate dividends, their structural differences in call/redemption risks and yield potential create a compelling case for favoring Public Storage's preferred shares for buy-and-hold investors.

Public Storage Series Y: A Higher-Yielding Anchor

Public Storage's Series Y preferred shares (PSA) offer a robust 6.375% annual dividend yield, significantly outpacing JPMorgan's 4.2% Series MM. Issued in 2014, these non-convertible shares carry no maturity date and no mandatory redemption requirement. Dividends are paid quarterly, with a fixed rate locked in perpetuity unless the shares are redeemed.

The key advantage lies in their call/redemption terms. The shares cannot be redeemed before March 17, 2019, a period that has long passed. Since then, Public Storage retains the right to redeem the shares at $25 per depositary share plus accrued dividends. However, the company has shown no indication of doing so, likely due to the shares' stability and the REIT's obligation to distribute 90% of taxable income to shareholders. This creates a reliable income stream for investors who hold the shares long-term.

JPMorgan's Series MM: Lower Yield with Regulatory Risks

JPMorgan's 4.2% Series MM preferred shares, issued in 2021, offer a lower yield but come with distinct risks tied to banking regulations. The shares are callable starting September 1, 2026, at par value ($25 per share). However, investors face an additional layer of uncertainty: a “Capital Treatment Event.” If regulatory changes threaten the shares' classification as Tier 1 capital, JPMorgan could redeem them within 90 days of the event. This adds volatility, as banking regulations are subject to rapid shifts in response to economic conditions.

Yield Spread Analysis: Why PSA's Premium Makes Sense

The 215-basis-point yield gap between PSA's 6.375% and JPMorgan's 4.2% reflects fundamental differences in risk and stability. Public Storage's REIT structure ensures dividends are tied to its operational cash flow, which remains robust despite rising interest rates. The company's Q2 2025 results, showing 95.1% occupancy and steady AFFO growth, underscore this stability.

In contrast, JPMorgan's preferred shares are subordinate to debt and subject to banking-specific risks. If the Federal Reserve raises rates further or imposes stricter capital requirements, JPMorgan may face pressure to redeem these shares early, forcing investors to reinvest at lower yields.

Investment Thesis: Buy-and-Hold Investors Should Prefer PSA

For income-focused investors with a long-term horizon, Public Storage's Series Y offers superior risk-adjusted returns. The shares' non-convertible structure, lack of maturity date, and REIT-backed dividend stability make them a safer bet. Meanwhile, JPMorgan's preferreds, while cheaper upfront, carry redemption triggers that could disrupt income streams.

Action Items for Investors:
1. Buy PSA Series Y if you prioritize steady, high income and are willing to forgo conversion upside.
2. Avoid JPMorgan's Series MM unless you can tolerate potential early redemption risks tied to regulatory changes.
3. Monitor interest rates: Rising rates could pressure both preferred stocks, but PSA's REIT dividends are less sensitive to rate hikes than bank preferreds.

Conclusion

Public Storage's Series Y preferred shares stand out as a compelling income vehicle, combining a generous yield with minimal call risk and structural stability. JPMorgan's offering, while cheaper, carries regulatory uncertainties that could undermine its appeal. For buy-and-hold investors, PSA's Series Y is the safer, higher-reward choice in this comparison.

Stay disciplined and stick to your income goals.