Exchange Traded Funds (ETFs)

A Popular Preferred ETF With Strong Liquidity

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.

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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.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.