Infrastructure Capital Advisors has partnered with Virtus ETF Solutions to launch the first exchange traded fund that specifically targets high yielding liquid preferred securities issued by REITs. Infrastructure Capital Advisors rolled out the InfraCap REIT Preferred ETF (NYSEARCA:PFFR).
The new REIT Preferred ETF has a 0.45% expense ratio and according to Jay D. Hatfield, Co-founder and President of InfraCap
PFFR is one of the newest products to overlap the newly added 11th sector in the S&P 500 and allows investors to invest in the real estate industry without having to select individual companies. We also believe it will be extremely attractive to investor’s looking for income in a yield-stretched market.
The new REIT ETF will try to reflect the performance of the Index REIT Preferred Stock Index, which is comprised of preferred securities listed on U.S. exchanges that are issued by REITs.
Preferred stocks are a type of hybrid security that show bond- and equity-like characteristics. The shares are issued by financial institutions, utilities and telecom companies, among others. Within the securities hierarchy, preferreds are senior to common stocks but junior to corporate bonds.
While preferred securities represent ownership interest in a company, preferred stockholders usually have no voting rights with respect to corporate matters of the issuer, but preferred securities have rights and characteristics like debt instruments. Additionally, preferred stocks issue dividends on a regular basis, but investors don’t usually enjoy capital appreciation on par with common shares.
REITs are securities that trade like a stock and invest in real estate directly through property ownership or mortgages. Consequently, revenue is mainly generated through rents or interest on mortgage loans. To qualify for special tax considerations, the asset also distributes the majority of income, about 90% of taxable profits, to investors as dividends, and receive at least 75% of that income from rents, mortgages and sales of property.
To be included in PFFR’s underlying index, components must be a preferred security from a U.S. REIT with $75 million or more in market capitalization, an average monthly trading volume of 250,000 shares or more for 6 months and a yield to worst of 3% or more.
The fund will include REITs that involved in mortgage, office properties, hotels, healthcare, shopping centers and others. Top holdings include VEREIT Inc (VER) 10.9%, WellTower Inc (HCN) 10.1%, Alexandria Real Estate (ARE) 6.2%, Felcor Lodging Trust (FCH) 6.0% and National Retail Properties (NNN) 5.3%.
On my radio show this week, Jay Hatfield (Co-founder of PFFR) is a guest.
To LISTEN to the Ground Up PODCAST CLICK HERE. (Let me know what you think about the radio show and the podcast).
REIT ETF: (PFFR)
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