Perpetuity. OK, it seems simple enough. What is typically used to calc the required return? CAPM? RFR + risk premium? Citigroup 6% trading at $19.45, Morgan Stanley 6.25% trading at $20.07. Then you have SLM 6% and Ford 7.5% trading in the $17 range. If the LT Treas is yielding 4.65%, is the risk premium on these pfds > 3.5%? How common is it for a S&P Co. to miss a pfd div? Can you short GAR 6.25% @ 25.09 and long MWR 6.25% @ $20, wash the coupons, and pocket the $5 less expenses? Is the risk of Morgan Stanley missing a pfd dividend really that high? If it takes 3-years for that MWR to get back round par thats about a 15% IRR. If its 10-years its still about 9.5%. What risk am I excluding?
Look at them on a yield to call basis too. Extension/contraction can mess with a position that is near the money also. Have industry risk in a short utility, long finance trade too. See what their correlations look like.