This is clearly a risky investment with this level of return. Essentially this is a bit of a gamble on the stability of the Spanish and Eurozone financial system.
This choice of investment follows a recent review of corporate bond opportunity for Abbey National, a subsidiary of Santander UK. The alternative of buying a Santander preference share (which was previously an Abbey National preference share) was suggested by blog reader Nandan.
There is an interesting Motley Fool thread here. This highlights that the income from this security is subject to the 10% 'tax credit'.
I include Preference Shares in the top Level 7 of the Income Pyramid, along with corporate bonds and other fixed interest securities.
In practice, the ISA account where I had cash to spend did not allow the purchase of the Abbey National corporate bond (which I would have preferred - as with a preference share the bank has the option of just stopping the coupon payment), so I opted for the preference share.
With a current yield at purchase of over 10%, this indicates that the market sees a lot of risk in this security. Most of this risk I believe relates to the Eurozone problems. I was therefore heartened today - following the Standard & Poors' Eurozone mark-downs in 9 Euro countries - to see that the price of this security has actually risen a little (rather than falling through the floor).
We'll see for the longer term; but for now this will hopefully provide a boost to my portfolio income.
Purchase price: £0.90
I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.