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 (NYSEArca: 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 (NYSEArca: SPY), according to Morningstar. [Preferred Stock ETF Climbs to One-Year High]
PowerShares Financial Preferred Portfolio (NYSEArca: 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 (NYSEArca: 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
