Displaying items by tag: preferreds

(New York)

One of the questions that not many are covering is how preferred stock will behave as interest rates rise. Preferreds have been seeing their dividend yields rise as investors have shed Treasuries and exited some preferred-focused ETFs. Some preferreds from prominent companies like JP Morgan and Bank of America are yielding 6%. The largest preferred ETF, PFF, currently yields 5.8%. “We’re incredibly constructive on the market now”, says a preferred fund manager at Nuveen.

FINSUM: Remember that preferreds have a major credit component to them and that issuers are not obligated to pay dividends like they are on bonds. However, corporations take doing so very seriously, which means you can often get junk-like yields from good companies, all with significantly less risk. That said, rates rising will probably spark some further losses.