Preferred stocks occupy a unique space in the world of investments. They combine characteristics of both stocks and bonds, making them an attractive choice for investors seeking a balance between income and stability. Preferred stock exchange-traded funds (ETFs) provide a convenient way to access this asset class, offering diversification and liquidity. In this article, we will explore five preferred stock ETFs known for their capacity to deliver high and stable dividend income.
- iShares Preferred and Income Securities ETF (PFF)
The iShares Preferred and Income Securities ETF (PFF) is one of the largest and most popular preferred stock ETFs. It tracks the ICE BofA US Preferred Stock Index and offers exposure to a diversified portfolio of U.S. preferred stocks. PFF is known for its consistent dividend payments and ample liquidity, making it an ideal choice for income-oriented investors.
- Invesco Preferred ETF (PGX)
The Invesco Preferred ETF (PGX) seeks to track the ICE Exchange-Listed Preferred & Hybrid Securities Index. PGX is known for its focus on investment-grade preferred stocks, providing a level of credit quality and stability. Investors appreciate PGX for its steady income stream, and it is often considered for long-term income strategies.
- Global X SuperIncome Preferred ETF (SPFF)
The Global X SuperIncome Preferred ETF (SPFF) takes a different approach by offering a diversified portfolio of preferred stocks from both the U.S. and international markets. This global perspective provides investors with an opportunity to enhance diversification and capture higher yields. SPFF’s income potential makes it an attractive choice for income-focused portfolios.
- Invesco Financial Preferred ETF (PGF)
The Invesco Financial Preferred ETF (PGF) is a sector-specific ETF focusing on preferred stocks within the financial industry. It tracks the ICE Exchange-Listed Preferred & Hybrid Securities Ex-Financials Index. Investors who believe in the financial sector’s stability and growth prospects may find PGF an appealing choice for preferred stock exposure.
- Principal Spectrum Preferred Securities Active ETF (PREF)
The Principal Spectrum Preferred Securities Active ETF (PREF) is an actively managed ETF, which means that a portfolio manager selects preferred stocks based on their analysis. PREF aims to provide investors with high income potential while actively managing credit and interest rate risk. This active approach may be suitable for those who want professional management of their preferred stock investments.
Key Considerations for Preferred Stock ETFs
When evaluating preferred stock ETFs, consider the following factors:
Yield: Assess the ETF’s current yield, which represents the annual income generated by the portfolio. Different preferred stock ETFs may offer varying levels of yield.
Credit Quality: Preferred stocks come in different credit quality categories, from investment grade to speculative. Check the credit quality of the holdings to match your risk tolerance.
Liquidity: Ensure the ETF is sufficiently liquid, meaning that it can be traded without significantly impacting the market price. High liquidity is particularly important for preferred stock ETFs.
Expense Ratio: Lower expense ratios can improve overall returns by reducing the costs associated with the ETF.
Diversification: Evaluate the ETF’s holdings to ensure it offers diversification across various sectors and issuers.
Active vs. Passive: Decide whether you prefer an actively managed or passively managed ETF, depending on your investment approach.
Preferred stock ETFs are an attractive option for investors seeking a balance between high dividend income and portfolio stability. These ETFs offer diversification, liquidity, and professional management in some cases. By considering yield, credit quality, liquidity, expense ratios, and your preferred investment approach, you can select the preferred stock ETF that aligns with your income and investment objectives. These ETFs can play a valuable role in income-focused portfolios, offering a steady stream of dividends in today’s investment landscape.
