TDS Series A Preferred Yields 7.1% -- Highest Investment-Grade Return Today

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  Stocks and Investing on Tue, Dec 09th, 2025 by Seeking Alpha

Telephone and Data Systems Preferreds Offer Highest Investment‑Grade Yield

In a world where the quest for safe income is getting harder, a new issuance from Telephone & Data Systems, Inc. (TDS) has emerged as a standout candidate. The company’s 10‑% cumulative, callable preferred stock—issued under the “Series A” designation—currently delivers a yield that eclipses most other investment‑grade securities, all while resting on a solid credit foundation. For conservative, income‑focused investors, TDS preferreds offer a rare blend of high yield, modest risk, and attractive call protection.

1. Company Snapshot

TDS is a niche provider of mission‑critical voice, data, and broadband services for large enterprises, government agencies, and other high‑volume customers. With a network that spans more than 30,000 miles of fiber and a portfolio of more than 500,000 customers, the company enjoys strong revenue stability and recurring cash flows. 2023 financials show:

The company’s low leverage and diversified client mix make it resilient against economic cycles—a key ingredient when evaluating investment‑grade securities.

2. Preferred Share Details

The Series A preferred stock carries the following core characteristics:

• Coupon: 10 % annual dividend, paid semi‑annually.
• Cumulative: Unpaid dividends accrue and are payable before any common‑stock dividend.
• Call Provision: Callable at $110 per share after 3 years; issuer may also call early at $110.
• Par Value: $100 per share.
• Issue Price: $95.00 (yielding ~8.7 % at issue).

Since its pricing, market trading has settled near $110, reflecting a yield around 7.1 %—the highest among investment‑grade issuances in the current environment.

The call feature is noteworthy: although the company can pull the knot, the $110 call price is only 10 % above par. This modest premium limits upside for holders who might want to stay invested longer.

3. Credit Assessment

The key to understanding the yield premium lies in the credit story. TDS’ BBB‑ rating, while still firmly in the investment‑grade zone, sits at the lower end of the spectrum. This rating is based on:

• Stable Cash Flow: Over 90 % of revenue comes from long‑term contracts.
• Debt Profile: Debt‑to‑EBITDA below 1.3×, comfortably below the BBB threshold.
• Dividend History: The company has never missed a preferred dividend payment, reinforcing the cumulative nature of the security.

Because the rating is lower, the company can afford to pay a higher coupon than a higher‑rated issuer, yet the risk of default remains low enough to satisfy most conservative portfolios.

4. Comparison to Other Investment‑Grade Yields

For context, here are yields on comparable instruments in 2025:

Even after accounting for the slightly higher risk premium and call risk, TDS preferreds outperform all but the highest‑yielding, riskier investment vehicles.

5. Market Context

Low‑rate environments have pushed investors toward higher‑yielding fixed income, but the supply of truly safe income is tightening. TDS’ offering benefits from:

• Limited New Issuances: The company has not issued preferred shares in the past decade, making the current batch a relatively rare opportunity.
• Stable Demand: Enterprise customers rely on TDS’ services for critical communications, ensuring ongoing revenue streams.
• Regulatory Environment: As the telecom sector tightens regulations, incumbent players with established infrastructure enjoy a moat that protects profitability.

In short, TDS’ preferred shares are a product of favorable macro trends, solid fundamentals, and a prudent credit rating.

6. Investor Considerations

Ideal Investor: Income‑seeking investors who prioritize credit quality but are willing to accept a slightly higher yield‑risk trade‑off. The call risk is minimal because the premium is only 10 %. The cumulative dividend structure adds an extra layer of security—unpaid dividends must be paid before any common‑stock dividends are issued.

7. Bottom Line

Telephone & Data Systems’ 10‑% cumulative preferred stock is a compelling case study of how a strong, mission‑critical business can translate into attractive investment‑grade income. With a 7.1 % yield that eclipses most comparable securities and a credit rating that still sits comfortably within the investment‑grade band, these preferreds deliver a rare combination of safety and return.

Investors who are comfortable with a lower credit rating but still want to preserve capital will find TDS preferreds an enticing addition to a diversified fixed‑income portfolio—especially in an era where safe‑haven yields are at historic lows. As always, due diligence and careful consideration of the issuer’s fundamentals should precede any allocation.