Virtus InfraCap U.S. Preferred Stock ETF (PFFA) seeks to provide high current income by investing primarily in U.S. preferred stocks and other income-generating securities. Preferred stocks are hybrid securities that typically offer higher yields than common stocks while maintaining priority over common shares for dividend payments and liquidation proceeds.
How It Works
PFFA employs an actively managed approach, with portfolio managers selecting preferred stocks, convertible preferred securities, and other income-generating instruments based on credit quality, yield potential, and interest rate sensitivity. The fund focuses on investment-grade and high-yield preferred stocks from various sectors, with particular attention to financial institutions that issue the majority of preferred securities. Portfolio construction emphasizes diversification across issuers while maintaining focus on current income generation.
Key Features
- Attractive 7.88% dividend yield provides substantial current income compared to traditional bond and equity ETFs
- Active management allows tactical positioning across preferred stock market segments based on credit and interest rate cycles
- Focuses on hybrid securities offering equity-like yields with bond-like characteristics and senior claim priority
Risks
- This ETF can lose value when interest rates rise, as preferred stocks are sensitive to rate changes and could decline 10-20% in rising rate environments
- Credit risk exposure means the fund could suffer losses if preferred stock issuers face financial distress or reduce dividend payments
- Concentration in financial sector preferred stocks creates vulnerability to banking industry downturns and regulatory changes affecting preferred issuance
Who Should Own This
Best suited for income-focused investors with medium-to-high risk tolerance seeking current yield above traditional bonds and dividend stocks. Appropriate as a satellite holding (5-15% of portfolio) for investors with 3+ year time horizons who can tolerate interest rate volatility in exchange for higher income generation.