Why Preferred Stock ETFs Are Flying PFF my favorite

When the term “preferred stock” comes up, does it conjure images of exclusive shares that only sophisticated investors can purchase? The fact is, anyone can buy preferred stock now – through exchange traded funds (ETFs).

Don Dion for TheStreet says that the preferred ETFs offer access and diversification along with increased liquidity for the preferred shares. Owners of preferred stock have a higher claim on assets and earnings than owners of common stock.

There are several reasons that these shares and ETFs have attracted more attention lately:

• Financial shares have shown marked weakness because of the housing and credit meltdown. Their yields have declined quickly.
• The payouts provided by preferred securities have the payout advantage of bonds and the tax advantage of common dividends.
• Some investors treat their preferred shares as havens. The Jobs and Growth act of 2003 reduced the tax on dividends, making payouts from these funds relatively tax efficient.

My favorite play in preferred Stock etf's is PFF, iShares S&P U.S.Preferred Stock Index Fund which holds Freeport copper, wells fargo, metlife, SCHERING-PLOUGH, ford and citigroup preferred shares to name a few. Expense ratio is .48 basis points, trades around 800,000 shares daily. Pays a Super HEALTHY dividend of 10.48% monthly. Up 12.44% year to date.

Some fund info :

The Fund seeks to track the price and yield performance before fees and expenses of the S&P U.S. Preferred Stock Index. The Index measures the performance of a select group of preferred stocks listed on the NYSE, AMEX or the NASDAQ Stock Market, Inc. The Index includes preferred stocks with a market capitalization over dollar 100 million. The Index may include many different categories of preferred stock such as floating rate preferred stock, fixed rate preferred stock, perpetual preferred stock, convertible preferred stock, trust preferred securities and various other traditional and hybrid issues of preferred stock.


Disclosure I am Long PFF in my Financial folio.