ETF Spotlight: PowerShares Preferred Portfolio (PGX) | ETF Trends

ETF Spotlight on PowerShares Preferred Portfolio (NYSEArca: PGX), part of a weekly series.

Assets: $1.4 billion

Objective: Tracks the Bank of America Merrill Lynch Core Fixed Rate Preferred Securities Index.

Holdings: Barclays, HSBC, Morgan Stanley, Wells Fargo and General Electric are among the largest holdings in PGX

What You Should Know

  • PGX owns preferred stock, which is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument.
  • Owners of preferred stock are usually given a fixed dividend rate that’s less than debt issued by a company, but more than dividends in common stock.
  • The fund is primarily composed of financial preferred stocks, with 82% of the weight going to such issues.
  • Before any dividends can be paid on the common shares, all dividends owed to the preferred stock classes must be satisfied. Owners of preferred shares also give up their voting rights.
  • Communications and utilities each account for about 4% of the fund.
  • The expense ratio is 0.50% and it currently yields 6.58%, making it competitive on both fronts with other preferred stock ETFs

The Latest News

  • Investors appear to be shifting their focus to safe-havens and defensive investments these days, boosting the profile of preferred stock funds once again, says Michael Gayed at Seeking Alpha
  • They seem to find the dual benefits of preferreds appealing: a little bit of stock, a little bit of bond
  • Gayed points out, however, that preferred stocks have underperformed the S&P 500 since late last year, though PGX and other preferred stock ETFs are right around their long-term trend lines, a signal of a potential long-term uptrend


The ETF Spotlight archives.

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.