“Investors must be comfortable with exposure to the sector, including European financials,” according to a Morningstar analyst report on the ETF. “Preferred stock is a hybrid security usually issued by highly leveraged companies, such as financial institutions, telecoms, and utilities. It has characteristics of both bonds and stocks.”
From a technical perspective, Kimble Charting Solutions notes that PFF has broken a support line that has held since August 2011. Some of the recent selling may be related to worries the tax rate on qualified dividends might rise in 2013 following Obama’s re-election. [Dividend ETFs: What Obama Win Means for Tax Rates]
iShares S&P U.S. Preferred Stock Index Fund
Full disclosure: Tom Lydon’s clients own SPY.