Preferred stock ETFs

Introduction

There are 16 ETFs that invest in preferred stocks. If you new to preferred stocks, you can read what is a preferred stock? Virtually all of these ETFs invest primarily in exchange traded preferred stocks.

Our database currently contains 591 preferred stocks that are traded on U.S. stock exchanges, with a total market capitalization of $168,758,119,457. See our list of preferred stocks. These 591 preferred stocks currently have an average dividend yield of 6.04%.

But these ETFs typically also invest a portion of their assets in certain "hybrid" securities that are considered to be similar in nature to preferred stocks. This primarily includes certain long-term subordinated notes that are traded on U.S. exchanges. These are considered to be hybrid preferreds because of their long-term nature and because many of them include a provision that allows the company to defer payment of interest under terms specified in the prospectus.

Our database currently contains 213 exchange traded debt, with a total market capitalization of $48,553,778,256. See our list of exchange traded debt. These 213 exchange traded debts currently have an average dividend yield of 5.66%.

But not all of these exchange traded debts are considered to be hybrid preferreds and are eligible to be purchased by a preferred stock ETF. Their is no standard definition, as every preferred stock ETF and preferred stock index uses its own definition of what makes up a "hybrid security".

Preferred stock ETFs may also hold a small number of units. A unit is a security that trades as one symbol but that consists of two securities. The two different securities can be different combinations of securities: a common stock and a warrant, or a common stock warrant and an exchange traded note.

Our database currently contains 198 units, with a total market capitalization of $201,687,104,404. See our list of units. Many preferred stock ETFs that include "hybrid securities" in their list of eligible investments will include units that contain a preferred stock or a long-term exchange traded note.

As an example, let's look at the current holdings of PFF, the iShares Preferred and Income Securities ETF:

TypeWeight
Preferred stocks75.26%
Exchange traded debt21.13%
Units3.16%
Unknown0.83%

What do they not invest in?

Virtually all ETFs primarily buy exchange traded securities, so they don't have a lot of exposure to preferred stocks that are traded over the counter, or OTC. We don't currently have in our database OTC preferred stocks, but we believe that there are around 400 to 500 preferred stocks that trade OTC. These have symbols just like OTC stocks and are available to all investors.

Preferred stock ETFs also don't currently have a lot of exposure to Rule 144A preferred stocks. Rule 144A is a Securities and Exchange Commission rule that allows qualified institutions to trade securities amongst themselves without registering the securities with the S.E.C. We don't currently have in our database Rule 144A preferred stocks, but we believe that there are usually several thousand Rule 144A preferred stocks being traded. Since they are not widely traded in the public, they don't have symbols but rather are identified using ISINs or CUSIPs.

Preferred stock ETFs don't usually have any exposure to contingent capital securities, which are traded OTC or as Rule 144A securities. Contingent capital securities (sometimes referred to as “CoCos”) were invented after the financial crisis in 2008/2009 and are primarily issued by U.S. and foreign banks. CoCos are debt or preferred securities with loss absorption characteristics built into the terms of the security, for example a mandatory conversion into common stock of the issuer under certain circumstances, such as the issuer’s capital ratio falling below a certain level. Since the common stock of the issuer may not pay a dividend, investors in these instruments could experience a reduced income rate, potentially to zero, and conversion would deepen the subordination of the investor, hence worsening the investor’s standing in a bankruptcy. Some CoCos provide for a reduction in the value or principal amount of the security under such circumstances. In addition, most CoCos are considered to be high yield or “junk” securities and are therefore subject to the risks of investing in below-investment-grade securities.

Current ETFs

Here are the preferred stock ETFs that are currently in our database:

SymbolDescriptionInception DateMarket CapActions
PGFInvesco Financial Preferred ETF12/01/2006$1,576,944,000Analyze
PFFiShares Preferred and Income Securities ETF03/26/2007$16,655,767,000Analyze
PGXInvesco Preferred Portfolio ETF01/31/2008$4,770,885,000Analyze
PSKSPDR Wells Fargo Preferred Stock ETF09/16/2009$1,237,185,000Analyze
IPFFiShares International Preferred Stock ETF11/15/2011$37,422,000Analyze
PFXFMarket Vectors Preferred Securities ex Financials ETF07/16/2012$740,512,500Analyze
SPFFGlobal X SuperIncome Preferred ETF07/16/2012$183,524,597Analyze
VRPInvesco Variable Rate Preferred ETF05/01/2014$1,435,393,000Analyze
EPRFS&P High Quality Preferred ETF05/23/2016$76,608,000Analyze
PFFRInfraCap REIT Preferred ETF02/07/2017$51,465,088Analyze
PREFPrincipal Spectrum Preferred Securities Active ETF07/10/2017$145,362,600Analyze
PFFDGlobal X U.S. Preferred ETF09/11/2017$681,967,294Analyze
PFFAVirtus InfraCap U.S. Preferred Stock ETF05/15/2018$134,687,076Analyze
PFFLETRACS Monthly Pay 2x Leveraged Preferred Stock ETN09/25/2018$19,470,000Analyze
PFLDAAM Low Duration Preferred and Income Securities ETF11/27/2019$3,011,250Analyze
PFFVGlobal X Variable Rate Preferred ETF06/24/2020$2,598,182Analyze

Let's look at the approaches used by these ETFs.

EPRF - S&P High Quality Preferred ETF

Seeks to track, before fees and expenses, S&P U.S. High Quality Preferred Stock Index.The Index selects fixed-rate investment grade preferred issues (BBB- or higher) from U.S. listed preferred stocks and maintains an allocation of 75% to cumulative preferreds. Market cap: $76,608,000

IPFF - iShares International Preferred Stock ETF

Seeks to track, before fees and expenses, the S&P International Preferred Stock Index. The Index is designed to measure the performance of non-U.S. traded, developed market preferred stocks. Non-constituent preferred stocks must have a full market capitalization of at least US$ 125 million (US$ 100 million for current constituents). Preferred stocks issued by a company to meet its capital or financing requirements are eligible. These include floating and fixed rate preferreds, cumulative and non-cumulative preferreds, and preferred stocks with a callable or conversion feature. Market cap: $37,422,000

PFF - iShares Preferred and Income Securities ETF

Seeks to track, before fees and expenses, the ICE Exchange-Listed Preferred & Hybrid Securities Index. The Index measures the performance of a select group of exchange-listed, U.S. dollar denominated preferred securities, hybrid securities and convertible preferred securities. The Index includes issuances of preferred stocks with amounts outstanding over $100 million, convertible preferred stock with at least $50 million face amount outstanding, and hybrid securities with at least $250 million face amount outstanding. Market cap: $16,655,767,000

PFFA - Virtus InfraCap U.S. Preferred Stock ETF

This is an actively managed fund. The Fund seeks current income and, secondarily, capital appreciation through a portfolio of over 100 preferred securities issued by U.S. companies with market capitalizations of over $100 million. Security selection and weightings are based on a variety of quantitative, qualitative, and relative valuation factors. Modest leverage (typically 20-30%) is utilized to enhance portfolio beta, and options strategies are used in an effort to enhance current income. Market cap: $134,687,076

PFFD - Global X U.S. Preferred ETF

Seeks to track, before fees and expenses, the ICE BofAML Diversified Core U.S. Preferred Securities Index.The Index tracks the performance of exchange-listed U.S. dollar denominated preferred stock and convertible preferred stock publicly issued by corporations in the U.S. domestic market. Qualifying securities must have a traded market value of at least $6 million on in each of the previous three calendar months in order to qualify for inclusion. Market cap: $681,967,294

PFFR - InfraCap REIT Preferred ETF

Seeks to track, before fees and expenses, the Indxx REIT Preferred Stock Index. The Index is a market cap weighted index designed to provide diversified exposure to high yielding liquid preferred securities issued by Real Estate Investment Trusts listed in the U.S. The index is calculated on a total return basis. Preferred stocks must be listed on a stock exchange and have a minimum market capitalization of $75 million. Stocks with mandatory conversion provisions are excluded. Market cap: $51,465,088

PFFV - Global X Variable Rate Preferred ETF

Seeks to track, before fees and expenses, the ICE U.S. Variable Rate Preferred Securities Index.The Index is designed to track the broad-based performance of the U.S.-listed variable rate preferred securities market. Qualifying preferred securities must be listed on a U.S. exchange, denominated in U.S. dollars, have floating or variable dividends or coupons, and have a minimum amount outstanding of $50 million. Qualifying preferred securities may, however, be issued by non-U.S. companies. Qualifying securities must be issued in $25, $50, $100, or $1000 par/liquidation preference increments, must have a traded market value of greater than $6 million in each of the previous three calendar months, and must have at least one year remaining to maturity. Constituents in the Underlying Index are capitalization-weighted based on their current amount outstanding times the market price plus accrued interest. Market cap: $2,598,182

PFLD - AAM Low Duration Preferred and Income Securities ETF

Seeks to track, before fees and expenses, the ICE 0-5 Year Duration Exchange-Listed Preferred & Hybrid Securities Index.The Index is composed of shorter duration exchange-listed U.S. dollar denominated hybrid debt and preferred stock publicly issued by corporations in the U.S. domestic market. The securities must have an option-adjusted duration of less than 5 years. The Index includes issuances of preferred stocks and notes with at least $100 million face amount outstanding and hybrid securities with at least $250 million face amount outstanding. Market cap: $3,011,250

PFXF - Market Vectors Preferred Securities ex Financials ETF

Seeks to track, before fees and expenses, the Wells Fargo Hybrid and Preferred Securities ex Financials Index.The Index tracks the overall performance of publicly traded non-financial preferred securities including those that, in Wells Fargo Securities, LLC’s judgment, are functionally equivalent to preferred securities such as convertible securities, depository preferred securities and perpetual subordinated debt. Market cap: $740,512,500

PGF - Invesco Financial Preferred ETF

Seeks to track, before fees and expenses, the Wells Fargo Hybrid and Preferred Securities Financial Index. The Index is a market capitalization weighted index designed to track the performance of preferred securities traded in the US market by financial institutions. The Index is composed of preferred securities with either fixed or floating rate dividends issued by financial institutions that have received an industrial sector classification of "financial" from the Bloomberg Professional Service. Market cap: $1,576,944,000

PGX - Invesco Preferred Portfolio ETF

Seeks to track, before fees and expenses, the ICE BofAML Core Plus Fixed Rate Preferred Securities Index. The Index tracks the performance of fixed rate US dollar-denominated preferred securities issued in the US domestic market. Securities must be rated at least B3, based on an average of three leading ratings agencies: Moody’s, S&P and Fitch, and must have an investment-grade country risk profile (based on an average of Moody’s, S&P and Fitch foreign currency long-term sovereign debt ratings). The Index includes both traditional and other preferred securities, including preferred securities issued by foreign companies in the form of American depositary receipts (“ADRs”), as well as senior and subordinate debt securities. Unlisted preferred securities are excluded from the Index, but unlisted senior or subordinated debt-like securities are eligible for inclusion. The Index may include Rule 144A securities. Market cap: $4,770,885,000

PREF - Principal Spectrum Preferred Securities Active ETF

This is an actively managed fund that seeks to provide current income. Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in preferred securities at the time of purchase. Examples of preferred securities include preferred stock, certain depositary receipts, and various types of junior subordinated debt (such debt generally includes the contractual ability to defer payment of interest without accelerating an immediate default event). It concentrates its investments (invests more than 25% of its net assets) in securities in the financial services (i.e., banking, insurance and commercial finance) industry. Market cap: $145,362,600

PSK - SPDR Wells Fargo Preferred Stock ETF

Seeks to track, before fees and expenses, the Wells Fargo Hybrid and Preferred Securities Aggregate Index.The Index is designed to track the performance of non-convertible, $25 par preferred securities listed on US exchanges. The index is composed of preferred stock and securities that, in Wells Fargo's judgment, are functionally equivalent to preferred stock including, but not limited to, depositary preferred securities, perpetual subordinated debt and certain securities issued by banks and other financial institutions that are eligible for capital treatment with respect to such instruments akin to that received for issuance of straight preferred stock. Market cap: $1,237,185,000

SPFF - Global X SuperIncome Preferred ETF

Seeks to track, before fees and expenses, the S&P Enhanced Yield North American Preferred Stock Index. The Index is designed to track 50 of the highest yielding preferred securities from the U.S. and Canada, the two largest preferred stock markets (S&P, 2012). The underlying universe for the index is all preferred securities in the S&P/TSX Preferred Share Index and the S&P U.S. Preferred Stock Index, with a total market capitalization of more than $250 million. Preferred stocks must have a three-month average daily value traded (ADVT) of $1 million. The maximum number of lines per issuer is set to three (3) and a maximum index weight of 5% is set per issuer. In such a case, all three eligible issuer lines are included in the index and capped on a pro-rata basis to a maximum of 5% for the issuer as a whole. Market cap: $183,524,597

VRP - Invesco Variable Rate Preferred ETF

Seeks to track, before fees and expenses, the Wells Fargo Hybrid and Preferred Securities Floating and Variable Rate Total Return Index. The Index is a market capitalization-weighted index designed to track the performance of exchange and non-exchange traded preferred stock, as well as certain types of “hybrid securities” that are functionally equivalent to preferred stock, that are issued by US-based or foreign issuers and that pay a floating or variable rate dividend or coupon. “Hybrid Securities” are debt securities that have equity features such as deferral of interest payment obligations and the extendibility of maturity dates. The Index does not include contingent capital securities, auction rate securities, private placement securities, and Rule 144A securities. Market cap: $1,435,393,000

Conclusion

One thing we do at StockMarketMBA.com is give each ETF a rating for long term investors. Here is a summary of our ratings

Our ratingCount
Pass6
Consider7
Editor's choice3
Total16

Here are the preferred stock ETFs that we have given a rating of "editor's choice", our highest rating:

SymbolDescriptionInception DateCategoryActions
VRPInvesco Variable Rate Preferred ETF05/01/2014Special Security TypesAnalyze
PREFPrincipal Spectrum Preferred Securities Active ETF07/10/2017Special Security TypesAnalyze
PFFDGlobal X U.S. Preferred ETF09/11/2017Special Security TypesAnalyze


All data is a live query from our database. The wording was last updated: 09/21/2020.

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