I have been enjoying dividends from iShares Preferred and Income Securities ETF (PFF) for several years. PFF is like that reliable old friend who always shows up on time and never forgets your birthday. It provides exposure to a diverse set of fixed-rate preferred stocks and offers a trailing twelve-month yield of around 6.26% with an expense ratio of 0.46%. It’s not flashy, but it gets the job done, making it a long-time favorite for income investors like myself.
Then, one day, during a conversation about Preferred Stocks as an alternative to traditional investments, a friend hit me with a new idea: Global X Variable Rate Preferred ETF (PFFV). I was skeptical at first—like when someone tells you they found a better coffee shop than your usual—but then they mentioned a better monthly payout than PFF. Now, if there’s one thing that gets my attention, it’s higher monthly dividends.
PFFV is the new kid on the block. It lacks the long history of PFF, but it offers a distinct advantage: Variable Rate Preferred Stocks. Unlike PFF, which holds fixed-rate preferred shares, PFFV adjusts its dividends based on interest rate movements—kind of like a stock market chameleon.
Comparing the Two ETFs:
| Metric | PFFV | PFF |
|---|---|---|
| Expense Ratio | 0.25% | 0.46% |
| Dividend Yield | 7.26% | 6.26% |
| Management | Passive | Passive |
| Rate Type | Variable | Fixed |
| Liquidity | Moderate | High |
The more I thought about it, the more I realized that PFFV could be a fantastic hedge against rising interest rates. If rates go up, PFFV's dividends should rise too, thereby raising the value or price. In contrast, PFF could see price declines since its payouts are locked in. It’s like choosing between an adjustable-rate mortgage and a fixed one—except in this case, an adjustable rate might actually work in my favor. Of course, if partaking in the D.R.I.P. plan, a price decline would be great riding until the next Economic Cycle (IMO).
The Bigger Picture: The Economy Looks... Shaky
Looking at the state of the economy, I can’t help but feel like I’m watching a slow-motion train wreck. The national debt is skyrocketing, the government seems to have discovered an endless money printer, and inflation refuses to go away. Everywhere I look, people are struggling—boarded-up houses, homeless encampments, and rising costs of living. Meanwhile, the Federal Reserve is playing seesaw, trying to control inflation while also keeping employment numbers looking decent. And then there’s the President, trying to plug the budget holes with Tariffs, which is like putting a Band-Aid on a broken dam.
Will the Fed raise interest rates or start cutting them? No one knows, but I figured it's best to be prepared for both scenarios.
A Shift in My Portfolio: Saying Goodbye to AT&T
Recently, I found myself with more cash on hand after exiting my position in AT&T (T). Now, AT&T has been a solid dividend payer for both me and my daughter, but this year, the stock price surged, giving me a prime opportunity to lock in some profits. AT&T has been good to me, but let’s be honest—telecom is a brutal space right now.
T-Mobile (TMUS) is looking like the cool kid in town, especially among transportation workers, who love its affordable tethering and included internet services. I don’t know who’s going to win this telecom war, but I do know I don’t want my money caught in the crossfire.
So now, with extra cash in my pocket, I have a choice:
Move the funds into preferred stocks (PFF & PFFV) immediately.
Deploy capital gradually over time (Dollar-Cost Averaging).
Since I love Monthly Dividends and stable income, I’m leaning toward gradually increasing my position in both PFF and PFFV. This way, I hedge against rate changes while letting compounding work its magic.
Final Thoughts: Stability in a Wild Market
Preferred Stocks have been a great hybrid investment for me, balancing security, liquidity, and consistent income. With interest rate uncertainty, PFFV’s variable rate structure could be a strong hedge, while PFF remains a solid, fixed-income choice. Selling AT&T has freed up cash, and I’m now strategically reallocating funds into preferred ETFs that align with my income goals.
If you’re looking for steady monthly income, Preferred Stocks and ETFs like PFF and PFFV could be great options. But, as always, do your research, evaluate your risk tolerance, and invest wisely.
What are your thoughts on Preferred Stocks and ETFs? Let me know in the comments—I’m always up for a good investment chat (especially if it comes with coffee).