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Explorer ○○○

PFFD Preferred ETF

I jotted this one down the other day to consider for my IRA and was wondering if anyone holds it. It has only been around a few years. 5.8% div and a reasonable <1% fee. I know there are some preferred CEF's that some have mentioned in the past but I'm not interested in a leveraged fund as there seems to be enough leverage going around right now.

Any thoughts? Thanks

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6 Replies
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Frequent Contributor

Re: PFFD Preferred ETF


@MNfish wrote:

I jotted this one down the other day to consider for my IRA and was wondering if anyone holds it. It has only been around a few years. 5.8% div and a reasonable <1% fee. I know there are some preferred CEF's that some have mentioned in the past but I'm not interested in a leveraged fund as there seems to be enough leverage going around right now.

Any thoughts? Thanks


PFFL, the leveraged ETN that you mentioned, is tied to a 50/50 holding of PGX and PFF, both preferred ETFs and both unleveraged.

ElLobo, de la casa de la toro caca grande
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Contributor ○○○

Re: PFFD Preferred ETF

There's a couple of things to like about PFFD if your objective is reliable income

69.6% of the annual distribution for 2019 was qualified dividends, which is good for a taxable account but won't matter in an IRA. The remainder of the annual dividend was ordinary income....no ROC or capital gains

The income expense ratio is 3.8% which is very low for a non-Vanguard ETF

But like most fund's like this, the dividend is gradually declining each year, although not by much. Oct  2017 = $.118 down to $.113 most recent.

I haven't done it, but the next thing I'd look at is what preferreds its holding just to try to get a sense of whether the dividend is at risk for preferreds from high risk industries.

Otherwise, it looks like a pretty secure 5.85% current yield

BruceM

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Explorer ○○○

Re: PFFD Preferred ETF

@BruceM  Thanks Bruce. Almost 300 holdings and the top 20 are mostly banks.


Global X U.S. Preferred ETF - PFFD
Fund Holdings Data as of 05/22/2020
% of     Net Assets Name
3.176     WFC 7 1/2 PERP
2.456     BAC 7 1/4 PERP
2.453     AVGO 8 09/30/22
1.44       C  7.13013 10/30/40
1.438     ALLY 6.17738 02/15/40
1.194     JPM 6 PERP
1.124     DHR 4 3/4 04/15/22
1.116     WFC 4 3/4 PERP
1.079     JPM 5 3/4 PERP
1.027     WFC 5.85 PERP
0.968     D 7 1/4 06/01/22
0.951     PNC 6 1/8 PERP
0.95       C 6 7/8 PERP
0.949     SO 6 3/4 08/01/22
0.881     HSBC 6.2 PERP
0.864     BAC 6 PERP
0.858     BAC 5 3/8 PERP
0.856     JPM 6.1 PERP
0.853     NEE 4.872 09/01/22
0.813     T 5.35 11/01/66
0.793     COF 5 PERP

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Contributor ○○○

Re: PFFD Preferred ETF

@MNfish 

Although this may not be feasible for a fund, for individual preferreds one of my screening criteria is the parent company must pay a common dividend and that dividend has never been cut to zero. My reasoning is that if the company BOD will cut the common to zero, its only one other step to cutting the preferred dividend to zero. So with a fund, I might check the dividend history of the top 10 holdings, or so.

BruceM

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Re: PFFD Preferred ETF

I own some PFF which is OK for a long term investment. 

However recently I have moved to individual preferreds as I appreciate the price reliability.  Takes more research of course and in the past few weeks they have gotten more expensive. 

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Re: PFFD Preferred ETF

I own PFFD now, but I also owned PGX in the late 2000s when I learned that not even a financial crisis will stop preferred stock ETFs from "coming back" after a crash--(individual ones are of course more dicey).

I later sold PGX in a zest to make my taxable account more tax-friendly, but decided to re-enter this space with PFFD as a tactical capital appreciation move after the crash in March -- and wish I had bought a lot more.  I was just bottom-fishing at the time--knowing I would want to own a fund like this later for income when I retire in a few years and why not start building it now.  It was a good entry point and when looking for bargains that "wouldn't go bankrupt" no matter what, I learned from 2008 that preferred stock ETFs always fit that bill. 

It's much less a good deal now than it was in March, but the nice thing about building a position in these types of ETFs is that another downturn will just bring another good buying opportunity.  If I recall correctly, I believe PFFD had the most competitive expense ratio which is why I jumped on it and I appreciated its diversification.

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