Consider a Diversified Income ETF

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Last week, the ETF Talk began a new series focusing on what I believe will be some of the most notable funds for income-oriented investors in 2016. This week, I’d like to feature another one of my favorites funds in this area, the iShares U.S. Preferred Stock ETF (PFF).

View the current price, volume, performance and top 10 holdings of PFF at ETFU.com.

PFF gives investors access to some of the best preferred stocks currently listed on both the New York Stock Exchange (NYSE) and the NASDAQ. Preferred stocks are rather unique in the investing world because they are a hybrid combination of stocks and bonds, and capable of moving higher in tandem with the equity markets while still delivering respectable yields.

With 40% of the fund’s assets devoted to banks, it’s not surprising that PFF quickly overcame its brief slump as the Federal Reserve’s rate hike loomed. That uptrend has continued and PFF is up nearly 3% from its Dec. 14 low, with fairly stable performance throughout the rest of 2015. Other solid factors working in the fund’s favor include its 5% dividend yield, expense ratio of just 0.47% and more than $14 billion in assets managed.

PFF chart EtF talk 1222

Unlike many of the select sector ETFs we covered recently, in which roughly half of a fund’s assets were invested in its top 10 companies, only 17% of PFF’s assets are devoted to the fund’s top 10 holdings. The largest holding is Allergan plc, with just 3.13% of the fund’s assets. As far as sectors, banks, diversified financials, real estate and insurance rank among the fund’s most popular places to put money.

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If you’re looking for ways to participate in multiple sectors of the market without investing too heavily into any particular one, the iShares U.S. Preferred Stock ETF (PFF) could be a good place to start.

I’ll be back next week with another income fund for your consideration.

Remember to look for the current price, volume, performance and top 10 holdings of PFF at ETFU.com.

If you want my advice about buying and selling specific ETFs, including appropriate exit points, please consider subscribing to my Successful ETF Investing newsletter.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

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