For those of you unfamiliar with this series of articles, they're basically an approximate five year profit and loss review of a number of Exchange Traded Funds that primarily profit and, consequently, distribute dividends earned from their investments in preferred securities. This link will provide you the information necessary to fully appreciate and understand the following article, and all the articles of the series. It will also serve to eliminate lots of redundancy.
The PowerShares Financial Preferred Portfolio (NYSEARCA:PGF) was the next on my list, therefore the following description and chart:
Now lets dig into the facts learned fro PGF's prospectus. Managemant fees including unnamed expenses adds up to a total of .63%. Doesn't seem like much but it adds up over time. However there are added fees not included in the above: Transaction costs, such as commissions when securities are bought or sold, and any applicable taxes if held in a taxable account. The more active the trading account the higher these fees.
This fund generally invests 90% of it total assets in preferred securities of financial institutions, which might be fixed or of variable rate that might adjust to LIBOR or a T-Bill rate. The fund will ten to avoid concentration of more that 25% of the value of its total assets in any one industry or sector.
There are the usual risk disclaimers, but one that I paid close attention to was the fact that the financial preferreds they invest in are non-cumulative, meaning if for any reason the dividends are suspended, they are lost and will not be made up. Worse, the fund might be required to include that unpaid income in their gross income statement, thereby taxed even though the funds were not received. Additionally, these preferred are less liquid and difficult to sell, especially during a downturn. And because they invest in a much larger number of shares than a private shareholder, selling them in quantity get that much harder.
Finally, the funds distributions will generally be taxable as either ordinary income or a long-term capital gain or loss.
It displays PGF's performance over the past five years. Frankly, as with PFF, I am impressed. Not only had this fund paid out an unbroken series of respectable dividends, it has increased value. However, after several discussion I decided that to go back to inception was not a truly fair gauge of these funds successes or failures. Consequently the five year study shall be the future basis of each fund's performance.
Consequently, over the past five years, PGF has distributed $6.1968* for each share invested at an approximate price of $18.00 on June 27, 2011.
*Dividend distribution figures from DividendInvestor.com.
- 6.1968/18.00 = 34.43% yield over 66 months.
- 34.43/66 = 0.00521 X 12 = 6.26% per year yield.
Therefore, if my math is correct, the investor would have profited by a yearly dividend yield of 6.26% over the past 5+ years. Respectable, but not earth shattering; yet, it's relatively of limited risk and the need for careful and constant monitoring.
However, over the life of the fund, the figures have been kind, considering the gain of $1.03 from its price at buy-in at approximately 18.00 to its current price of 19.03.
- 19.03 - 18.00 = 1.03 gained since inception.
- 6.1968/66 = 0.0939 per month per share dividend received.
- 6.1968 + 1.03 (NASDAQ:GAIN) = $7.2268 total gain over 5.5 years
- 7.2268/18.00 (price) = 40.15% yield over 66 months.
- 40.15/5.5 (years) = 7.30% per year yield.
A very nice profit over the last 5.5 years of this fund thus far. However, the individuals profit or loss will primarily depend upon when he entered the fund and at what price he bought in at. However, these gains were certainly nothing to brag about, considering during that time, had he invested in the S&P 500 his gains would have been substantial, as displayed below. However this has not taken into account the amount of dividends PGF has distributed over these 5.5 years, which will certainly shrink the spread:
In conclusion, if my calculations are correct (please review them carefully to determine if any were made in error, and the wrong conclusion was consequently arrived at), this has been a good investment had you bought in around or below the 18.00 figure. In fact, the success of your investment is often determined by the time you bought in and the price you paid for your shares. Pretty much the same as with most investments.
This following is the list of funds I have, and will investigate to give you a clear picture how each has performed over the past five years. Initially, I had decided to judge each over the entire life of the fund, but was dissuaded by a number of followers who advised that the results would be unfairly skewed by the recessionary contraction of 2008-9. The following is the list, which has grown considerably as a result of your additional requests: iShares US Preferred Stock (NYSEARCA:PFF) Power Shares Preferred ETF (PGX), Global X SuperIncome Preferred (SPFF). PowerShares Financial Preferred Portfolio (PGF), Market Vectors Preferred Securities ex Financials (PFXF), SPDR Wells Fargo Preferred Stock ETF (PSK), PowerShares Variable Rate Preferred Portfolio (VRP), iShares International Preferred Stock ETF (IPFF), John Hancock Preferred Income Fund II (HPF), First Trust Preferred Securities and Income ETF (FPE), Flaherty & Crumrine Total Return Fund (NYSE:FLC), Flaherty & Crumrine Preferred Securities Income Fund (NYSE:FFC), Flaherty & Crumrine Dynamic Preferred & Income Fund (NYSE:DFP), and Flaherty & Crumrine Preferred Income Opportunity Fund (NYSE:PFO), Clough Global Opportunities Fund (NYSEMKT:GLO), First Trust Strategic High Income Fund II (NYSE:FHY), First Trust High Income Long/Short Fund (NYSE:FSD), and Prudential Global Short Duration High Yield Fund (NYSE:GHY).
Below is a screenshot taken from my IB platform, I populated, to keep you apprised of the order of my reviews, and as a bonus, I included the total amount of each of their 2015 disbursed dividends.
Notice, the 2015 dividends are placed just to the right of the fund symbols. To the right of that are the last trade prices as of the close of trading on 6/23/16. Of further interest, at the far right of the screen are the prices of the 13 week highs and lows of each fund.
Notice too, that I selected 2015 for the dividend disbursement figures, however should you desire to do this for the trailing twelve months (TTM), all you need do is visit DividendInvestor.com where these figures are readily available. An example of which I have provided below:
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.