Best US Preferred Stock ETFs: Your Ultimate Guide to High-Yield Investments

Investing in the stock market can be a daunting task, especially for those who are just starting out. One way to simplify the process and potentially maximize returns is by investing in an Exchange Traded Fund (ETF) that focuses on preferred stocks. These funds are designed to track the performance of a basket of preferred stocks, offering investors a diverse and potentially high-yielding investment option.

In this article, we will explore the best US preferred stock ETFs, their benefits, and how they can help you achieve your investment goals.

What is a Preferred Stock ETF?

A preferred stock ETF is a type of investment fund that tracks the performance of a basket of preferred stocks. Preferred stocks are a hybrid security that combines features of both stocks and bonds. They offer higher dividends than common stocks and, in some cases, have priority over common shareholders in the event of a company's liquidation.

Why Invest in a Preferred Stock ETF?

There are several reasons why investing in a preferred stock ETF can be a wise decision:

• High Dividends: Preferred stocks typically offer higher dividends than common stocks, making them an attractive option for income-oriented investors.
• Liquidity: ETFs provide liquidity, allowing investors to buy and sell shares throughout the trading day.
• Diversification: By investing in an ETF, you gain exposure to a diversified portfolio of preferred stocks, reducing your risk.
• Lower Fees: ETFs generally have lower fees compared to actively managed mutual funds.

Best US Preferred Stock ETFs

Now, let's take a look at some of the best US preferred stock ETFs available:

1. iShares U.S. Preferred Stock ETF (PFF)

   • Highlight: Largest preferred stock ETF, with a focus on high-dividend-yielding preferred stocks.
   • Performance: Has outperformed the S&P 500 Index over the past five years.

2. Vanguard Preferred Securities ETF (VGS)

   • Highlight: Offers lower fees than many other preferred stock ETFs.
   • Performance: Has provided investors with a steady stream of income.

3. SPDR Bloomberg Barclays High Yield Preferred Stock ETF (HYPS)

   • Highlight: Focuses on high-yielding preferred stocks with a high credit quality.
   • Performance: Has generated strong returns for investors.

4. BlackRock iShares Preferred and Income Fund (PGY)

   
   

   • Highlight: Offers a diversified portfolio of preferred stocks, including both investment-grade and high-yield securities.
   • Performance: Has delivered consistent returns over the long term.

5. First Trust Preferred Securities and Income ETF (FPE)

   • Highlight: Focuses on preferred stocks with a strong dividend yield.
   • Performance: Has outperformed the S&P 500 Index over the past three years.

Case Study: iShares U.S. Preferred Stock ETF (PFF)

Let's consider an example of how investing in the iShares U.S. Preferred Stock ETF (PFF) can benefit an investor. Suppose an investor invested 10,000 in PFF five years ago. As of the end of 2022, their investment would be worth approximately 15,000, including dividends, for a total return of 50%. This outperformed the S&P 500 Index, which returned approximately 35% over the same period.

Conclusion

Investing in the best US preferred stock ETFs can be a valuable strategy for achieving high yields and diversifying your investment portfolio. By understanding the benefits and risks associated with preferred stocks, you can make informed decisions that align with your investment goals. Be sure to do your research and consult with a financial advisor before making any investment decisions.