As the ETF industry has expanded in recent years, so too has the number of asset classes accessible through exchange-traded products. Preferred stock ETFs have become a big hit with some investors, offering “hybrid” exposure that has delivered strong returns and provided valuable diversification benefits to traditional portfolios by combining the benefits of both traditional equities and bonds [see Visual History Of The S&P 500].
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The chart below highlights the dividend yield, three-year performance and number of holdings in the five largest preferred stock ETFs:
- SPDR Barclays Capital Convertible Bond ETF (CWB, B+)
- S&P US Preferred Stock Fund (PFF, A+)
- Financial Preferred Portfolio (PGF, A-)
- Preferred Portfolio (PGX, A+)
- SPDR Wells Fargo Preferred Stock ETF (PSK, A)
This comparison is only based on the returns of these ETFs; it is also important for investors to take a close look at the weighting and holding methodologies of these ETFs, as these can strongly influence future returns and dividend yields.
Disclosure: No positions at time of writing.
- Preferred stock