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Preferred Stock ETFs with 6% Yields Beating S&P 500


Some preferred stock ETFs boasting yields of 6% or more are outperforming the S&P 500 this year.

Investors are being rewarded for chasing yield in ETFs that track preferred shares although a potential risk is high concentration in the financial sector.

The iShares S&P U.S. Preferred Stock Index Fund (PFF) is the largest ETF in the category with $9.9 billion in assets. It pays a 30-day SEC yield of 6.1%, according to manager BlackRock. [Is Dodd-Frank the Death of Preferred Stock ETFs?]

Year to date, PFF has delivered a total return of 15.4%, compared with a 13.8% advance for SPDR S&P 500 ETF (SPY) , according to Morningstar. [Preferred Stock ETF Climbs to One-Year High]

PowerShares Financial Preferred Portfolio (PGF) yields 6.6% and has gained 19% so far this year.

Preferred stocks are a type of hybrid security that exhibit the characteristics of equity and bond instruments. The shares are issued by financial institutions, utilities and telecom companies. [What is an ETF? — Part 21: Preferred Stocks]

PowerShares Preferred Portfolio (PGX) is another popular choice for the sector. The ETF has a 30-day SEC yield of 6.6%.

Like post preferred stock funds, PGX is heavily weighted toward the financial sector. The ETF has a 91.8% stake in financials, according to Invesco PowerShares. [ETF Spotlight: SPDR Preferred Stock]

iShares S&P U.S. Preferred Stock Index Fund

Full disclosure: Tom Lydon’s clients own PGF and SPY.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.