Preferred stock ETFs have been on fire this year as income investors have hungrily sought high yield and capital appreciation opportunities.
These hybrid securities offer characteristics of both equity and debt instruments which coalesce to generate a healthy income stream with low correlation to traditional stock indices.
From a capital structure standpoint, preferred stocks are listed above common equity and issuers are mandated to pay dividends on preferred stocks before common shareholders.
The iShares U.S. Preferred Stock ETF (NYSE: PFF) is the largest fund in this arena with nearly $10 billion invested in 315 preferred securities.
This sector is typically dominated by preferred holdings in financial companies, real estate, and banks.
Currently, PFF ...
More...