The Best Preferred Stock ETFs   4 comments

For those of you looking for a good preferred stock etf, I did a little survey of the etf’s in the preferred stock category, and here are the top 4:

1. PowerShares Preferred (PGX): This one wins, by virtue of having the highest real dividend yield (Real Dividend Yield = Dividend Yield – Expense Ratio), at 6.09% (the actual yield is 6.59%). PGX carries a mixture of preferred stocks in different industries, although like most preferred stock etf’s, that blend is dominated by financial stocks.

2. iShares U.S. Preferred Stock ETF (PFF): This one came in a close second, with a real yield of 5.95% (actual yield is 6.43%). PFF has been around awhile, and has a lot more volume. If liquidity is your main concern, then PFF is certainly a reasonable choice.

3. Market Vectors Preferred Securities ex Financials ETF (PFXF): If you want a preferred stock etf, but you don’t want any financial industry exposure, then PFXF is your etf. It carries a real yield of 5.9% (actual yield of 6.3%). This one does have a low volume problem (average of 41k), so stay away from it if liquidity concerns you. On the other hand, it does carry the lowest expense ratio of any of the preferred stock etfs.

4. PowerShares Financial Preferred (PGF): If you ONLY want financial preferred stocks, PGF is your play. However, I would really recommend sticking to the top 2 listed above, because they carry a large percentage of financial preferred stocks. The balance in PGF isn’t very good, with #1 holding HSBC making up 9.14% of the portfolio, and the top 10 holdings making up 41.21% of the overall holdings. This is just a poorly weighted etf. Even with that added risk, the real yield is only 5.89% (actual yield is 6.49%).

All 4 of the above etfs pay monthly dividends, so they are great additions to dividend and/or fixed income portfolios. But if you want a “sleep at night and forget about it” holding, the top 2 are really your best choices.


Posted January 16, 2014 by edmcgon in Stocks

4 responses to “The Best Preferred Stock ETFs

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  1. Can you pl provide the tax treatment of these. Is it qualified or regular dividend?
    I am also watching closed end fund like FFC for 9% and RNP

  2. Ed, how do you see PFXF compared to SPY? Which would be preferred?
    I don’t like the others here, because of the financial exposure. Taking in the financials is too much a gamble to me.

    • plas,
      I would prefer PFXF for the dividend. However, SPY has better volume and liquidity. It is difficult to compare the two, because their advantages are both so strong. I guess I would probably look somewhere else for a dividend if these were my only two choices.

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