Raymond James Financial's Preferred Stock: A Strategic Income Play in a Rising Rate World

In an era where central banks are tightening monetary policy to combat inflation, income-seeking investors face a critical challenge: balancing yield with safety. For those prioritizing high-quality, non-cumulative preferred shares, Raymond James Financial's 6.375% Fixed-to-Floating Rate Series B Preferred Stock (RJF.PRB) emerges as a compelling candidate. This instrument, trading at $25.26 (a 1.04% premium to its $25 liquidation preference), offers a current yield of 6.31% while anchoring its value in the robust credit profile of a diversified financial services leader.

The Yield Attraction: Fixed Rates and Floating Potential

RJF.PRB's structure is designed to capitalize on both the current yield environment and future rate dynamics. Until July 1, 2026, the stock pays a fixed dividend of 6.375%, translating to $1.59375 annually per depositary share. This fixed-rate period aligns with the Federal Reserve's projected tightening cycle, ensuring investors lock in a premium yield before transitioning to a floating rate tied to three-month LIBOR.

The floating-rate mechanism post-2026 introduces a strategic upside. If LIBOR rises further, the dividend could increase, offering a hedge against inflation. This dual-phase structure is rare among preferred shares and positions RJF.PRB as a hybrid between traditional fixed-rate instruments and rate-sensitive securities.

Credit Strength: A Pillar of Reliability

Raymond James Financial's creditworthiness is a cornerstone of this investment's appeal. The parent company holds A- ratings from Fitch and S&P and A3 from Moody's, with stable outlooks across all agencies. These ratings reflect its strong capital ratios, exceeding regulatory thresholds, and its record $6.94 billion in net revenues for the first half of 2025.

The firm's financial resilience is further underscored by its consistent common stock dividend growth—16 consecutive years of increases—demonstrating a culture of disciplined capital management. While RJF.PRB is non-cumulative (missed dividends are not carried forward), the company's track record of uninterrupted preferred stock payments mitigates this risk.

Payment Consistency: A Track Record of Execution

Recent dividend declarations highlight Raymond James' commitment to its preferred shareholders. On August 20, 2025, the board announced a $0.3984375 quarterly payout for RJF.PRB, payable on October 1, 2025. This follows a similar payment in July 2025, reinforcing the predictability of the income stream.

The non-cumulative feature, often a red flag for income investors, is less concerning here due to the company's low payout ratio of 19.17% for common stock and its robust liquidity. With capital ratios well above regulatory requirements, Raymond James has ample capacity to sustain preferred stock dividends even in a downturn.

Strategic Case for Immediate Action

For income investors, the timing is critical. The current yield of 6.31% is unusually attractive in a rising rate environment, where many fixed-income assets are repricing downward. Additionally, the stock's premium to liquidation preference suggests market confidence in its stability.

However, the transition to a floating rate in 2026 introduces uncertainty. Investors who purchase now will lock in the fixed-rate period, benefiting from both the current yield and the potential for higher dividends post-2026. Those who delay risk missing out on the fixed-rate window as rates normalize.

Conclusion: A High-Quality Anchor in a Volatile Market

Raymond James Financial's preferred stock is not without risks—non-cumulative terms and exposure to interest rate volatility are inherent. Yet, its combination of a premium yield, strong credit foundation, and strategic rate transition makes it a standout option for income-focused portfolios. In a world where certainty is scarce, RJF.PRB offers a rare blend of reliability and adaptability.

For investors seeking to balance yield with quality, the case for immediate action is clear. The question is not whether this stock is risky, but whether the alternative—holding cash or lower-yielding assets—is more so in an environment where rates are likely to remain elevated for years to come.