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, ETFs, and/or Closed End Funds, CEFs, that primarily invest in and hopefully profit from dividends earned from their investments in preferred securities, which they then distribute to shareholders. This link will provide you the information necessary to fully appreciate and understand the following article, ETFs vs. CEFs, and the remaining articles of this series. It will also serve to eliminate lots of reading redundancy for my regular followers.
This report concerns the Market Vectors Preferred Securities ex Financials ETF (NYSEARCA:PFXF), hence the following description and chart:
Lets dig into the facts learned from PFXF's prospectus. Management fees including unnamed expenses adds up to a total of .40%, which happens to be below the sector average, and is pointed out by the managers. 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. From my research thus far this appears to be standard operating procedure for funds such as this. The following blockquotes, of interest, are taken from the fund's prospectus:
The Fund normally invests at least 80% of its total assets in securities that comprise the Fund's benchmark index. The Preferred Securities Index is comprised of convertible or exchangeable and non-convertible preferred securities listed on U.S. exchanges, including securities that, in Wells Fargo & Company's (the "Index Provider") judgment, are functionally equivalent to preferred securities including, but not limited to, convertible securities, depositary preferred securities and perpetual subordinated debt, excluding securities with a "financial" industry sector classification (collectively, "Preferred Securities"). As of June 30, 2015, the Preferred Securities Index included 87 U.S.-listed securities of 50 issuers. The Fund's 80% investment policy is non-fundamental and may be changed without shareholder approval upon 60 days' prior written notice to shareholders.
The Fund may concentrate its investments in a particular industry or group of industries to the extent that the Preferred Securities Index concentrates in an industry or group of industries. As of the date of April 30, 2015, the Preferred Securities Index was concentrated in the real estate industry, and each of the utilities and telecommunications sectors represented a significant portion of the Preferred Securities Index.
It displays PFXF's performance over the past five years. At first look, this fund has performed well, maintaining its price. Additionally, its dividend distributions have remained consistent over the past five years. From 9/12 - 8/13 dividends distributed totaled 1.1961, relatively close to those distributed for 2015, which totaled 1.1494. 4.1593/57 (months)
Consequently, over the past fifty-seven months, PFXF has distributed $4.1593* for each share invested at an approximate price of $20.19 on July 23, 2012.
*I got the dividend distribution figures from Nasdaq.
- 4.1593/20.19 = 20.60% yield over 57 months.
- 20.06/57 = 0.00361 X 12 = 4.34% per year yield.
Therefore, if my math is correct, the investor would have profited by a yearly dividend yield of 4.34% over the past 4+ years. Not earth shattering; yet, it's relatively of limited risk and the need for careful and constant monitoring.
However, from inception, this fund has performed as it was designed to. Beside throwing off consistent dividends, its price appreciated from 20.05 to its current 20.44. If we divide 0.39 appreciation by 57 months we get a .0068 can add to the total yield, which is negligable and therefore not worth the additional math. And, according the following summary snapshot you will find a list of its top 10 holdings and the duration of each. Their mention of the 30 day yield differs from my view of this fund, which perplexes me. Your comments will be gratefully appreciated.
Not a very impressive profit over the past 4.75 years of this fund. However, the individuals profit or loss will primarily depend upon when one entered the fund and at what price he bought in. Had he bought in low, say in 12/23/13, at the very bottom, his gains would be impressive; however, had he bought in at inception, his gains were certainly nothing to brag about, considering that during that time, had he invested in the S&P 500 his gains would have been substantial, as displayed below:
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 not been a very good investment. In fact, the success of your investment is absolutely determined by the time you bought in and the price you paid for your shares. Therefore, I remain unconvinced at this time that an investment in this fund is a wise decision.
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. Here's that list of funds, which has grown considerably as a result of additions you requested: iShares US Preferred Stock (PFF) Power Shares Preferred ETF (PGX), Global X SuperIncome Preferred (SPPF). PowerShares Financial Preferred Portfolio (PGF), Market Vectors Preferred Securities ex Financials , 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 (FLC), Flaherty & Crumrine Preferred Securities Income Fund (FFC), Flaherty & Crumrine Dynamic Preferred & Income Fund (DFP), and Flaherty & Crumrine Preferred Income Opportunity Fund (PFO), Clough Global Opportunities Fund (NYSEMKT:GLO), First Trust Strategic High Income Fund II (FHY), First Trust High Income Long/Short Fund (FSD), Prudential Global Short Duration High Yield Fund (GHY), and ProShares UltraShort S&P 500 (SDS).
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 6/24/16. Of further interest, at the far right of the screen are the prices of the 13 week highs and lows of each fund.
Notice that I selected 2015 for the dividend disbursement figures, however should you desire to do this for the trailing twelve months, all you need do is visit DividendInvestor.com where these figures are readily available.
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.
Additional disclosure: Because this is a series of fund performance studies, although each is an entirely different study, the method I utilize to arrive at each conclusion is quite similar, and more effective because by using the same parameters, I am comparing apple to apples, not apples to pears.