Preferred stocks hold some of the same characteristics of bonds yet they are priced closer to stocks. Preferred stocks are considered senior to common shares in the case of liquidations and bankruptcies. They, however, are still junior to other forms of corporate debt such as straight bonds. One big advantage of preferred stocks is that they include dividend payments.
Preferred stocks have been an attractive area for more-income-minded investors lately. The stocks usually pay a fixed distribution rate plus any potential gains an investor can receive from shares’ price movements. Preferred shareholders are also given preferential treatment over common stock in bankruptcy proceedings and other legal disputes over distributions.
JUAN CARLOS ARANCIBIA, writing for INVESTOR’S BUSINESS DAILY, stated in a story yesterday, “The S&P U.S. Preferred Stock index returned 123.5% through last week since the March 9 low, noted Standard & Poor’s analyst Howard Silverblatt. He adds that it has risen 21.9% so far this year. What’s more, investments in the index grew 48% year to date, or 19% from March 9.”
There are a couple of ETF options available to participate. One option is the iShares S&P U.S. Preferred Stock Index Fund (PFF) which Investors Business daily reports, “is up 129% from its March 6 low, and up 10% so far this year.” Another option is the PowerShares Preferred (PGX).
For the whole Investment Business Daily story click: HERE