Income investors embraced preferred stocks, in large part, because of high yields, but as the spike in Treasury yields earlier this year and in 2013 taught investors, high-yielding assets are vulnerable to rising rates.
Preferred stocks are often viewed as hybrid securities, displaying both bond- and equity-like traits, and reside higher on the totem pole than do common stocks in terms of investor claims in the event of issuer default. As is the case with bonds, preferreds are sold at par value, or offer a fixed or floating rate of income, so prices fluctuate with interest rates, wrote William Scapell, director of fixed income and preferred securities portfolio manager at Cohen & Steers, for InvestmentNews.
ETFs To Play
Legacy preferred ETFs, including the iShares U.S. Preferred Stock ETF (NYSE: PFF) and the PowerShares Preferred Portfolio (NYSE: p>
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