ETF Spotlight: U.S. Preferred Stock

January 31st at 3:20pm by Tom Lydon

ETF spotlight on iShares S&P U.S. Preferred Stock (NYSEArca: PFF), part of an ongoing series.

Assets: $7.7 billion.

Objective: The iShares S&P U.S. Preferred Stock Fund tries to reflect the performance of the S&P Preferred Stock Index, which includes a selected group of preferred stocks listed on various exchanges, including the NYSE and Nasdaq. [Preferred Stock ETFs: High Yields, Capital Appreciation]

Holdings: Top holdings include: General Mltrs Co. 2.6%, HSBC Holdings 2.5%, Barclays Bank 1.7%, Wells Fargo 1.5% and Citigroup Cap XIII 1.5%.

What You Should Know:

  • BlackRock‘s iShares ETF division sponsors the fund.
  • PFF has an expense ratio of 0.48%.
  • The fund has 242 holdings and the top ten holdings make up 16.9% of the portfolio.
  • Sector allocations include: diversified financials 46.6%, banks 25.4%, insurance 6.8%, real estate 5.1%, capital goods 3.2%, automobile 3.2%, utilities 2.8%, telecom 2.0%, media 1.5%, energy 0.9% and other 2.6%.
  • It should be noted that financial sector picks make up about 80% of the fund.
  • PFF has a 12-month yield of 6.99%.
  • The fund is up 6.8% over the past month, up 2.6% over the last three months and up 4.2% over the last year.
  • The ETF is 2.0% above its 200-day exponential moving average.
  • Preferred stocks act like a hybrid of stocks and bonds – they make regular income payments, have no voting rights, are senior to common stocks and have priority over common stocks in dividends payouts.
  • “New regulations will dramatically change the preferred-stock industry,” according to Timothy Strauts, Morningstar analyst. “When the new rules take effect in 2013, It is expected that most banks will redeem their current issues of trust preferred stock.”
  • “This has large implications for preferreds because the expectation of redemption in less then two years will help support prices in the market today,” Strauts added.

The Latest News:

  • Financial sector stocks have been among the best performers in January. [‘January Barometer’ Bodes Well for Stock ETFs]
  • Financial stocks were up Tuesday after Eurozone leaders agreed on a new pact late Monday to promote fiscal responsibility across the region, report Sue Chang and Greg Morcroft for MarketWatch.
  • Investors are now focusing on bank’s good quarterly earnings and stronger loan growth numbers.

iShares S&P U.S. Preferred Stock

For past stories in this series, visit our ETF Spotlight category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.

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