This post is one in a series in which over 50 newsletter advisors share their Top Picks for 2012.

By Vivian Lewis, Global Investing

Royal Bank of Scotland (RBS) has tripped over its kilt. Nevertheless, as our top idea for 2012, we recommend the bank's preferred shares, specifically the non-cumulative preferred Q (RBS-Q) issues. We also like the preferred P series (RBS-P), which we already own.

RBS P & Q preferreds are not paying dividends until June 2012. However, I believe the dividends will resume then, which will be reflected in the price.

The shares were issued at $25 and targeted at U.S. retail investors. Interest payments were stopped for two years by the European Union's competition directorate because the British government controls 83% of RBS shares.

This allegedly creates a distortion in eurozone bank finance. However, the European Central Bank decision to allow banks to borrow for up to three years at 0.50% interest means that RBS is not getting a bargain because of its state ownership.

Moreover, RBS has been actively reducing its capital requirements by selling off assets acquired during its discredited former management's spending spree. It has already disposed of enough assets to reduce its need for government funding, and is selling its brokerage unit Hoare Govett, which it is not allowed to finance using branch deposits under new Basel rules.

Meanwhile, in the U.S., RBS is building up a business of exchange-traded notes (ETN) tracking stocks in the oil, gold, and pharmaceutical sectors.

In our view, it cannot fail to pay its other shareholders, even on the preferreds, and still maintain its ETN business, which is ultimately backed only by the bank's own credit and solvency.

We already own the RBS preferred shares series P, as noted above, and now recommend the preferred Q at under $12 for a double-digit payout level starting in six months. Mind your Ps and Qs!

See all 50+ stocks in our Top Picks 2012 Report.

Steven Halpern's TheStockAdvisors.com​​​ offers a free daily review of the favorite stock ideas of the nation's top financial newsletter advisors.