iShares Preferred and Income Securities ETF [PFF] Stock Forecast

iShares Preferred and Income Securities ETF is the dominant preferred ETF with over $12.76 billion in assets under management. The Invesco Variable Rate Preferred ETF could be getting more attention due to its floating rate exposure that shows less sensitivity to rising interest rates. Both had seen their yields start to rise, but some of those gains for PFF have been reversing more recently, while VRP's payout has continued to rise.

Preferred stocks offer higher dividend yields than common stocks, with yields of 4%, 6%, or even higher. The iShares Preferred and Income Securities ETF provides monthly dividend payouts, but its performance and dividend income have declined over time. Investing in PFF may not be a successful option for growth or income, especially for retirees on a fixed income.

Is there still a chance to buy the bank dip? You bet—with nifty yields up to 9.4%!

During this Fed tightening cycle, preferred stocks have declined significantly below par value which is normally $25. Buying preferred stocks at below par can represent an excellent total return opportunity as the current dividend yield is high relative to treasuries and other bonds. Also, there's the potential for price appreciation if the securities return to par.

It's no secret that we are currently in a high interest rate environment. The Federal Funds rate, the benchmark rate in the U.S. set by the Federal Open Market Committee (FOMC), currently sits between the range of 5.00% and 5.25%.

Investors can earn more yield, potentially for a longer time, with these relatively low-risk income-producing options.

iShares Preferred and Income Securities ETF offers investors exposure to US preferred stocks, with a 30-day SEC yield of around 6.6% and a focus on high income. The ETF is heavily concentrated in the financial sector, with 75% of its holdings in this area, but I believe the risk of another banking crisis is low. Despite some holdings having low credit ratings, I rate PFF a Buy due to its high income and potential capital appreciation.

Preferred shares and PFF often attract investors due to their yields and attachment to blue chip names, but the implications of perpetual securities are often overlooked. Preferred shares lack the protections and structure of fixed income and are sold largely to retail investors, but it is usually the issuer who benefits most. The asymmetric return distribution of newly issued preferred shares make them not worth the risk for low return.

PFF is the largest, most well-known preferred shares ETF in the market today. The fund focuses on financial issuers, and so has seen sizable losses in the recent past. A look at the fund, and some of its key characteristics, follows.

Bank securities and preferred CEFs have been some of the livelier parts of the income market in the last few months. In some of the hysteria, however, it's easy to lose sight of the facts and misinterpret the relationship between regional banks and preferred CEFs.

iShares Preferred and Income Securities ETF is a US stock and trading under the symbol PFF

iShares Preferred and Income Securities ETF stock price is $30.15 today.

Yes, iShares Preferred and Income Securities ETF is a publicly traded company.