Investors who are focusing on income generation can take a look at preferred stock exchange traded funds to bolster yields.

For example, the iShares U.S. Preferred Stock ETF (NYSEArca: PFF) has a 6.05% 12-month yield, PowerShares Preferred Portfolio (NYSEArca: PGX) has a 5.94% 12-month yield, Global X SuperIncome Preferred ETF (NYSEArca: SPFF) has a 6.75% 12-month yield, First Trust Preferred Securities and Income ETF (NYSEArca: FPE) has a 5.82% 12-month yield and SPDR Wells Fargo Preferred Stock ETF (NYSEArca: PSK) has a 5.24% 12-month yield.

Income investors may like preferred stock ETFs since the asset class offer stable dividends, don’t come with taxes on qualified dividends for those that fall into the 15% tax bracket or lower, are senior to common stocks in the event liquidation occurs, are less volatile than bonds and provide dividend payments before common shareholders.

Preferred stocks are a type of hybrid security that show bond- and equity-esque characteristics. The shares are issued by financial institutions, utilities and telecom companies, among others. Within the securities hierarchy, preferreds are senior to common stocks but junior to corporate bonds. Additionally, preferred stocks issue dividends on a regular basis, but investors are unlikely to enjoy capital appreciation on par with common shares.

Like bonds, preferreds are sold at par value, or offer a fixed or floating rate of income, so prices fluctuate with interest rates, writes William Scapell, director of fixed income and preferred securities portfolio manager at Cohen & Steers, for InvestmentNews.

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