By Andrew Bary
A new Whirlpool convertible preferred stock issue now offers a yield of more than 9%, but there's a catch involving the ultimate redemption value of the securities.
The appliance maker recently offered $525 million of 8.5% mandatory convertible preferred stock at a price of $50 a share as part of a twin offering that included 6.9 million shares of common stock as Whirlpool moved to reduce debt.
The convertible preferred stock is publicly traded on the NYSE under the ticker WHR PrA and finished Tuesday around $45, off 4% in the session. The drop in the preferred reflects the recent decline in the common shares, which were down 5% Tuesday at $60.35 after falling 6% on Monday. The stock hit a new 52-week low earlier Tuesday.
The preferred offers a higher-yielding alternative to Whirlpool common stock now yielding about 6%. Whirlpool cut its annual dividend roughly in half last year amid pressure on its earnings and there is some concern among investors about the safety of the current payout. There is less risk with a preferred dividend than one on common stock.
The convertible preferred carries a $4.25 a share annual dividend and given the currently discounted price relative to the face value of $50, the current yield is 9.4%.
The twist is that the deal is a mandatory convertible preferred stock (or a "mandy" in the convert world), meaning that it will automatically convert into common shares in three years. Investors are not guaranteed to get back the original $50 offering price.
Based on the current common price, holders of the preferred would get about $43 a share, below the current price, Barron's estimates. The ratio is 0.7246 share of common stock for each preferred share. If the common stock rallies, the ratio could fall to a minimum of 0.6167 shares.
The bull case on Whirlpool is that the company is the global leader in household appliances (washers, dryers, refrigerators) and that its operating results will improve with a better U.S. housing market, cost savings and protective tariffs.
The stock trades cheaply for 10 times projected 2026 earnings and for a 10%-plus free cash flow yield. The company has sizable debt of more than $6 billion, or more than four times annual Ebitda. Its market value is around $10 billion and sales are about $15 billion annually.
The company's recent common stock and preferred deals which raised close to $1 billion will help reduce debt. is there an extra word in here The twin offering drew criticism, however, from one of Whirlpool largest shareholder, Appaloosa Management which is headed by billionaire investor David Tepper.
"As one of its largest shareholders, we looked on with a certain astonishment at Whirlpool Corporation's recent issuance of equity, which resulted in a large, unnecessary dilution of shareholders. We believe this action reflects a striking lack of judgment on the part of the Board and senior management team," Tepper wrote in a letter to the company's board. Tepper's firm is a 6% holder.
Tepper has a great record but Whirlpool so far appears to have been a losing trade. At current levels, however, the stock and convertibles could do well.
Write to Andrew Bary at andrew.bary@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 03, 2026 16:47 ET (21:47 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments