A Popular Preferred ETF With Strong Liquidity

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

Preferred ETFs are a smart way for income-oriented investors to gain not only share price gains but a 5-7% yield while weathering the COVID-19 market volatility.

One such ETF is iShares Preferred and Income Securities ETF (NASDAQ: PFF). This fixed-income ETF provides exposure to U.S. corporate bonds and focuses on broad credit securities.

As a result, this ETF has strong liquidity and tight spreads, making it cost-competitive with its peer funds. PFF is especially recognized for strong block-trading liquidity, which makes it an appealing fund choice for large traders.

PFF currently is the most popular preferred stock ETF with $14.86 billion in assets under management, according to ETF.com. The fund has an expense ratio of 0.46% and has a dividend yield of 5.70%.

Though its year-to-date performance is at -7.37%, PFF is making an upward climb after dipping significantly in mid-March. The fund’s May 6 open of $34.07 still was well within its 52-week range. This specific fund targets preferred securities regardless of credit rating, providing a broad and diversified portfolio.

Chart courtesy of www.stockcharts.com

The majority of PFF’s holdings are allocated to the utilities sector which currently consumes 70.92% of the fund’s portfolio. PFF’s top holdings include preferred shares of Broadcom Inc. (AVGOP), 2.02%, Wells Fargo & Co. (WFCPL), 1.63%, Bank of America Corp. (BACPL), 1.48%, Crown Castle International Corp.(CCIPA), 1.38%, and Citigroup Capital (CPN), 1.27%. 

In summary, preferred ETFs may be the way to go for investors seeking some additional income, as it provides potential upside and a strong yield. PFF is a popular open-ended fund that was chosen by FactSet as an “Analyst Pick.” It is a competitive fund among others in the same sector, and its strong liquidity is helping it to navigate the uncertainties of the current COVID-19 market.

iShares Preferred and Income Securities ETF (NASDAQ: PFF) is an ETF that may be worth inspection as a possible consideration to add to an income-oriented equity portfolio.

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

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