by KYW's Salil Gutt

There is a sweet spot for income-oriented investors. The window may not remain open for long but it is possible to get a yield of around 7 to 7.5% on preferred stocks of the giant financial service firms. The stocks of companies like Morgan Stanley, Merrill Lynch, Citigroup, Bear Stearns, etc. have taken a pounding due to the subprime mess. 

Here's a quick primer on preferred stocks.

They are issued at $25 per share and at a specified interest rate. The shares then trade on the major stock exchanges and prices reflect market conditions. Currently the prices of almost all financial service preferreds are trading in the $20 to $23 range. Some companies pay rates around 6.5% on the $25 issue price so current prices will give investors around a 7 to 7.5%. yield.  I would focus on the preferred stocks of the companies that have received injections of capital from sovereign wealth funds. Sovereign wealth funds, also called SWF's in jest, are the investment arms of foreign countries awash in dollars.

An added plus, the company has the right to call the preferred stock but at the $25 issue price given yet another round of profit.