Forget CDs: 2 High-Yield Preferred Stocks Paying Up To 7.3%

Why Income Investors Should Look Beyond CDs 

When markets feel risky, investors often seek safety in certificates of deposit (CDs), particularly when interest rates are high. CDs provide predictable returns and FDIC insurance within applicable limits, making them a popular choice for conservative investors.

But safety comes with trade-offs. Your money is generally committed for a defined period, early withdrawals may result in penalties, and the interest income is generally taxed at ordinary income tax rates. More importantly, your investment has no potential for appreciation.

For investors willing to accept some market volatility, high-quality preferred stocks can offer an attractive alternative. They trade like stocks, provide regular dividend income, and can offer capital appreciation when purchased below their par value. Preferred dividends issued by U.S. corporations may qualify for preferential tax treatment, although investors should verify the specific tax treatment of each security.

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Preferred Stocks vs. CDs: Key Differences for Income Investors

Preferred stocks should not be viewed as a direct replacement for CDs. A CD offers principal protection through FDIC insurance within applicable limits, while preferred stocks are market-traded securities whose prices can fluctuate significantly. 

Preferred stocks typically offer higher yields, liquidity, and potential capital appreciation compared with CDs, but they do not provide FDIC insurance or guaranteed principal. They are best suited to investors who can tolerate price volatility and issuer-specific risk. 

Why Consider Preferred Stocks While Interest Rates Are Elevated?

With interest rates still elevated and many preferred stocks trading at significant discounts to par, we believe this is an attractive time to consider preferreds for higher income. Rather than locking money away in a CD, investors can potentially lock in a higher yield while retaining liquidity and the opportunity for capital appreciation. At High Dividend Opportunities, we issue a dedicated fixed income report every Sunday, discussing the preferred stocks and baby bonds we are buying.

Synchrony Financial Preferred Stock Offers a 7.3% Yield

Synchrony Financial (SYF) is a leading provider of private-label credit cards and consumer financing, with relationships across major retailers and consumer brands. The company continues to generate substantial earnings and maintain a strong capital position, providing an important foundation for its preferred securities.

Synchrony currently has two publicly traded preferred securities but we find one particularly attractive over the other: Synchrony Financial 5.625% Series A Preferred Stock (SYF-A).

SYF-A Trades at a Significant Discount to Par

SYF-A carries a 5.625% fixed coupon and has a $25 liquidation preference. Because the shares trade well below par (at $19.31), investors receive a substantially higher current yield than the stated coupon.

SYF-A offers a yield of 7.3%, while also providing potential capital appreciation if the shares move closer to their $25 liquidation preference. Of course, there is no assurance that the preferred will return to $25. The bank recently declared its Q3 distribution of $0.35/share for SYF-A, payable August 15th.

This is exactly the type of setup we look for in preferred stocks: a high current yield combined with a meaningful discount to par. Investors are being paid to wait by a well-capitalized financial institution while retaining the potential for capital gains if the preferred eventually trades closer to its liquidation value.

Charles Schwab Preferred Stock Yields More Than 6%

The Charles Schwab Corporation (SCHW) is one of the largest financial services companies in the United States, with 39.8 million active brokerage accounts and $13.08 trillion in client assets as of June 30, 2026.

For preferred investors, the strength of the underlying issuer matters. Schwab's large and diversified financial services platform provides a substantial earnings base supporting its capital structure. We particularly like SCHW.PR.J, the company's 4.45% non-cumulative perpetual preferred stock. The stated coupon may look modest, but preferred stocks should be evaluated based on the price you pay, not simply the coupon printed on the security.

SCHW-J Combines Steady Income With Potential Capital Appreciation

Charles Schwab 4.45% Series J Non-Cumulative Perpetual Preferred Stock (SCHW-J) currently trades below par at $17.28, or 31% below its $25 liquidation preference, offering investors a 6.4% yield. If market conditions improve and the security moves closer to its liquidation preference, investors could also benefit from capital appreciation. 

Schwab continues to pay the quarterly dividend on the security; its most recent declaration was $0.278 per share to be paid on September 1.

Are Preferred Stocks a Good Alternative to CDs?

Preferred stocks come with risks that CDs do not. Their market prices can decline when interest rates rise, and issuer-specific credit deterioration can hurt both the share price and dividend payments. Dividends can also be suspended or omitted, and non-cumulative preferred dividends generally do not have to be paid later if they are skipped. Finally, a $25 liquidation preference is not a guaranteed price target. A preferred stock can trade below $25 indefinitely, even if the issuer remains financially healthy.

While CDs offer safety, for investors willing to accept some market risk, high-quality preferred stocks can offer a compelling combination of high income, liquidity, and capital appreciation potential, and the possibility of favorable tax treatment. We believe the securities discussed today are worth considering for investors looking to enhance their income without locking away their capital.

At High Dividend Opportunities, the #1 service for income investors and retirees, we focus on finding high-quality income investments, including preferred stocks and baby bonds, to help our members build sustainable portfolios and generate reliable cash flow.