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| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Profiting with Preferred ETFs |
Seeking Alpha - Aug. 29, 2010 - by Brian Burns
Should you be putting your money into stocks or bonds? How about investing in a hybrid that contains the best of common stocks and the best of corporate bonds? This financial crossbreed exists in the form of preferred stock. What some investors call an evolution, others may call a mutation by claiming that preferred stocks combine the worst of common stocks and the worst of corporate bonds.
The Best Of
With preferred stocks you will typically receive a consistent dividend, as you would with bonds, but they are taxed like common stock dividends.
Preferred stocks will give you a higher price appreciation than bonds if the common stock increases but the price will not increase at the same rate as the common stock.
The dividend yield on preferred stocks is usually higher than the yield on the corporate bonds.
Preferred stocks have the first right to dividends; Preferred shareholders will be paid before any dividends are paid out to the holders of the common stock.
The Worst Of
Preferred shareholders do not have any voting rights.
In the case of a default, bond investors have the priority in claims on assets.
Preferred stocks can depreciate in value, just like the common stock, although they will usually retain their value better than common stocks.
Rising interest rates will have a negative impact on preferred stocks.
One way to get involved with preferred stocks is through ETFs. Two preferred stock ETFs that I follow are the iShares S&P US Preferred Stock Index Fund (PFF) and the PowerShares Preferred Portfolio ETF (PGX). These two ETFs are tied directly to the financial sector as the top 10 holdings between the two ETFs include
most of that sector’s major players: Barclays PLC (BCS), JP Morgan Chase & CO (JPM), HSBC Holdings (HBC), Wells Fargo & Company (WFC), Morgan Stanley (MS), and Bank of America (BAC).
You may be wondering why you would want to have anything to do with stocks (common or preferred) in the financial sector instead of simply buying a diversified bond fund for the yield. After all, much of the decline in the financial sector since April ’10 has been due to unfavorable economic data as well as uncertainty with how the banks will cope with the financial reform regulation, the Dodd-Frank bill. Specifically within the Dodd-Frank bill is the Durbin Amendment which Bank of America CEO, Brian Moynihan, states:
The most recent, the Durbin Amendment in the interchange area, this is going to cause a significant reduction in revenue in the future and a carrying value change in our asset in the credit card business...
Caution in this area is warranted but no matter what your thoughts are about the financial sector it appears that, in many circumstances, preferred stock ETFs can outperform both common stocks and corporate bonds.
Round 1: Preferred ETF's vs. a Morningstar Analyst’s Recommended Bond Fund
I took a look at the Morningstar Analyst Research application on SeekingAlpha.com. This handy application allows you to pull up analyst research reports on over 2,000 stocks and ETFs. I pulled up the report for PFF and found that the analyst didn't seem to be a big fan of preferred stocks. The report wasn't negative, I’d say it was neutral, but the analyst recommended the Barclays Capital Long Term Bond ETF (LWC) which I put to the test.
I looked at the prices for all three ETFs around the March 2009 stock market lows through 8/27/10. LWC’s inception date was 3/10/2009 which is why that date was chosen as the starting point for this test. The results clearly favor the preferred stock ETFs:
For the complete article visit Seeking Alhpa
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| Stuff to look at |
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Income Security Recommendation January 2013 Issue.
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