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. Preferred stocks issue dividends on a regular basis, but investors are unlikely to enjoy capital appreciation on par with common shares. [Rate Risk With Preferred ETFs]
VRP’s effective duration is 3.92 years, nearly a full year less than the equivalent duration on PGX, but VRP does not require a significant sacrifice in yield in exchange for that lower duration. The variable preferred ETF has a 30-day SEC yield of 4.84%, according to PowerShares data.
And for those that are into superficial statistics, there is this: PRF celebrated its first anniversary on May and is now home to $206.7 million in assets, making it one of the most successful ETFs to come to market last year.
PowerShares Variable Rate Preferred Portfolio
