Low bond yields are paving the way for investors to consider alternative income-generating assets, an area where active management can outperform. Consider the Principal Spectrum Tax-Advantaged Dividend Active ETF (PQDI).
PQDI is the first of its kind—offering investors access to qualified dividend income via all three sectors of the global U.S. dollar capital securities market. The Principal ETF targets qualified dividends, thereby helping U.S. taxpayers boost after-tax income.
In changing market environments, preferred and capital securities have historically delivered attractive risk-adjusted returns. Active management can enhance returns by selecting higher-quality and improving credits and avoiding speculative risks. Investors are seeking new innovative solutions to boost after-tax income, especially as interest rates remain low. PQDI’s exposure to preferred securities aims to provide tax-advantaged income as U.S. investors build and distribute wealth.
Perusing ‘PQDI’
PQDI components include, without limitation, preferred securities and capital securities of U.S. and non-U.S. issuers. The fund invests significantly in securities that, at the time of issuance, are eligible to pay dividends that qualify for favorable U.S. federal income tax treatment, such as dividends treated as qualified dividend income (QDI) or qualified dividends from real estate investment trusts (REITS).
Like common stock, preferred stock is issued by a company and traded on an exchange. Preferred stock prices can fluctuate, but most of the returns from preferred stock come from dividends. Unlike common stock, preferred stock dividends are predetermined and paid at regular intervals. These dividends are paid in full before any dividends are released to common stockholders.
PQDI has the objective of providing income and will invest in a diversified portfolio of USD denominated securities from all major sectors of the global U.S. dollar preferred and capital securities market. The fund will focus on income from dividends eligible for beneficial tax treatment, but it also invests in securities that are not eligible for such treatment. In particular, PQDI will seek securities that, at the time of issuance, are eligible to pay dividends that qualify for reduced U.S. federal income tax rates for “qualified dividend income” (“QDI”) or for the deduction of up to 20% of qualified real estate investment trust (“REIT”) dividends (“QRD”).
For more on active strategies, visit our Active ETF Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.