The fund “could be an appropriate satellite holding for income investors who are looking for a little extra yield and are willing to take on the risks embedded in moving down the capital structure from debt to do so,” says Morningstar’s Timothy Strauts in an analyst report on the ETF.
“Preferred stocks are exposed to interest-rate risk like most any other fixed income. A rise in interest rates will cause the price of these securities to drop,” he added.
Other ETFs in the category include PowerShares Financial Preferred (NYSEArca: PGF), PowerShares Preferred (NYSEArca: PGX) and SPDR Wells Fargo Preferred Stock (NYSEArca: PSK).
iShares S&P U.S. Preferred Stock
Tisha Guerrero contributed to this article.