Recent exchange traded fund launches have focused in on the theme of yield. New ETFs from providers Van Eck and Global X play on investor interest in yield with preferred shares, each with characteristics that can help build a custom portfolio.
The Global X SuperIncome Preferred ETF (SPFF) follows some of the highest yielding preferred stocks from both the U.S. and Canada. The top 5 holdings are from the financial sector, with Credit Suisse and American International leading the charge. The fund charges 0.58%.
"Preferreds have no voting rights, are senior in the capital structure to common stock, and have priority over common stock in the payment of dividends," says Morningstar analyst Timothy Strauts.
The Market Vectors Preferred Securities ex-Financials ETF (PFXF) started trading last Tuesday. The expense ratio is set at 0.48%. The ETF actually omits the financial sector completely. This feature may be attractive for many investors since the sector has been volatile for some time.
This feature is especially unique because most preferred shares and ETFs zero in on the financial sector. PFXF tracks the Wells Fargo Hybrid and Preferred Securities ex Financials Index, which tracks non-financial U.S. publicly traded companies. The ETF's largest sector is the REITs, or real estate investment trusts. The ETF yields 6.78%.
PFXF is unique from other preferred share ETFs because the expense ratio is the lowest seen in this sector and the fact that it carves out the financial sector.
"In developing PFXF we wanted to offer the income potential of preferred shares but limit potential volatility, by excluding which has been the most volatile sector in recent years," Brandon Rakszawski, product manager of Market Vectors said.
ETFs in direct competition with the latest releases:
- PowerShares Preferred Portfolio (PGX) yields 6.5%
- iShares S&P US Preferred Stock index Fund (PFF) yields 6.26%
- SPDR Wells Fargo Preferred Stock (PSK) yields 6.35%
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.