For those following flows, and in particular, fans of financials, a stand-out seems to be iShares’ U.S. Preferred Stock Index fund (NYSE ARCA:PFF), which is currently trading to yield 7%.
Preferred stocks, which are historically considered to be second-class citizens by those seeking “oomph” and predominantly issued by financial firms (75% of Pfd’s are courtesy of financial service companies), do offer the benefit of a dividend cushion. Unless the equities markets will continue their north-bound trajectory, there are plenty of people that appreciate the benefit of clipping coupons.
Harris Private Bank’s Chief Investment Officer Jack Ablin, recently spotlighted by SmartMoney for being a fan of select ETFs populated by Preferred’s says, “There’s more of an incentive to spread out the risk by way of an ETF. If things go sideways, you’ve still got a nice dividend.”
We won’t steal WSJ’s thunder, and even if SmartMoney’s audience includes sophisticated retail investors, the article is a good read for pros.