Preferred ETFs are a smart way for income-oriented investors to gain not only share price gains but a 5-7% yield while weathering the COVID-19 market volatility, notes Jim Woods, exchange-traded fund specialist and editor of The Deep Woods.
One such ETF is iShares Preferred and Income Securities ETF (PFF). This fixed-income ETF provides exposure to U.S. corporate bonds and focuses on broad credit securities.
As a result, this ETF has strong liquidity and tight spreads, making it cost-competitive with its peer funds. PFF is especially recognized for strong block-trading liquidity, which makes it an appealing fund choice for large traders.
PFF currently is the most popular preferred stock ETF with $14.86 billion in assets under management, according to ETF.com. The fund has an expense ratio of 0.46% and has a dividend yield of 5.70%.
Though its year-to-date performance is at -7.37%, PFF is making an upward climb after dipping significantly in mid-March. The fund’s May 6 open of $34.07 still was well within its 52-week range.
This specific fund targets preferred securities regardless of credit rating, providing a broad and diversified portfolio. The majority of PFF’s holdings are allocated to the utilities sector which currently consumes 70.92% of the fund’s portfolio.
PFF’s top holdings include preferred shares of Broadcom (AVGOP), 2.02%, Wells Fargo & Co. (WFC.P.L), 1.63%, Bank of America (BAC.P.L), 1.48%, Crown Castle International (CCI.P.A), 1.38%, and Citigroup Capital (C.P.N), 1.27%.
In summary, preferred ETFs may be the way to go for investors seeking some additional income, as it provides potential upside and a strong yield. PFF is a popular open-ended fund that was chosen by FactSet as an “Analyst Pick.”
It is a competitive fund among others in the same sector, and its strong liquidity is helping it to navigate the uncertainties of the current COVID-19 market. iShares Preferred and Income Securities is an ETF that may be worth inspection as a possible consideration to add to an income-oriented equity portfolio.
