Recently I received a note from a long-time subscriber asking what was going on with the Dividend Hunter recommended preferred stock ETFs. During the Covid crash, these ETFs and preferred shares in general were a great buy.
With lower risk than regular shares, pre-fixed dividends, and fire-sale prices, those of my Dividend Hunter subscribers who followed me in buying preferred shares could have locked in a huge chunk of income.
So I did some digging and found significant differences in the year-to-date returns between the two highest profile picks. It goes to show that not all ETFs are the same…
Preferred shares also have a preference over common shares for the payment of dividends. The company must pay the preferred dividends as long as it pays common stock dividends. As a result, preferred shares offer very secure, high-yield income potential.
I recommend using preferred stock investments as one type of high-yield investment for a balanced, income-focused investment portfolio.
Preferred shares have fixed dividends, so the share prices swing with changing interest rates, just as bond prices do. Rising rates will cause share prices to fall, which has been the case for the first half of 2022. I tell subscribers not to worry about the share prices. When investing in preferreds, the plan is to hold forever and earn a high yield. In most cases, shares will be held unless or until they get called in.
In the Dividend Hunter, I recommend investing in both individual preferred stocks as well as a high-quality preferred stock ETF.
The iShares Preferred and Income Securities ETF (PFF) is the largest and most popular preferred stock ETF. Passively managed, PFF tracks the investment result of an index of preferred and hybrid securities. The fund has 496 holdings, which covers almost every security in the category. PFF pays variable monthly dividends.
However, my own recommended ETF is the…
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