Beat inflation with exposure to preferred stock dividends
As consumer prices continue to climb, inflationary pressures are keeping fixed income investors on their toes, but there are options like exposure to preferred stock dividends.
Inflation can add a great deal of worry to a fixed income investor’s portfolio, eroding income over time. This becomes particularly disconcerting if inflation becomes more persistent rather than transitory.
Investors have a wide range of options when it comes to trying to beat inflation, which can include adding precious metals or even digital assets as cryptocurrencies get started. to gain popularity among investors. Another way is to try to get the highest return possible, but that also means taking on more credit risk.
Yields outside of the US may also be an option, but with the pandemic in tow, this also poses a risk for global markets. Another option is to strategically maintain exposure to US fixed income via preferred stock dividends.
1 Dividend ETF to Go For
Gaining this type of exposure to preferred shares is available with the Favorite US Global X ETF (PFFD). The fund seeks to provide investment results that generally correspond to the price and yield performance of the ICE BofA Diversified Core US Preferred Securities Index, which is designed to track the overall performance of the US preferred securities market.
“Preferred stocks are often analyzed alongside corporate and high yield bonds because of their yield-oriented characteristics and fixed-income-like behavior,” Global X research notes. Preferred bonds are lower in capital structure than traditional bonds and trade on an exchange offering additional liquidity.”
“For portfolio construction purposes, we believe they should be considered alongside corporate debt, high yield and other income-generating asset classes like emerging market bonds and senior loans like source of potential revenue,” Global X adds. privileged.”
Overall, PFFD offers investors:
- High Income Potential: PFFD invests in a broad basket of US preferred stocks, an asset class that has historically offered high return potential.
- Low spend rate: PFFD’s spend rate of 0.23% is half the average of competitors.
- Monthly Distributions: PFFD makes distributions on a monthly basis.
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