Portfolio Considerations: High-Yielding Preferred Stock ETFs

Savings accounts are paying less than 1%, 10-year U.S. treasury bonds are paying 2.9%, and intermediate-corporate bonds are paying only 4%, so income investors have been putting their money into preferred stocks, or preferreds. With current yields over 6%, preferred stock exchange-traded funds have had inflows of over $1.5 billion year to date.The most popular preferred ETF, iShares S&P U.S. Preferred Stock Index (PFF), is up an impressive 11.28% annualized over the last three years. This trounces the S&P 500 return of only 3.99% and Barclays Aggregate Bond return of 6.9%. Given the recent strong performance (and performance chasing from investors), let's examine whether preferred stock still makes sense for investment today.Preferreds 101Before considering an investment here, it is important to understand that preferreds are a hybrid security that have characteristics of both stocks and bonds. Preferred stock is typically issued by financial institutions,... Read more