This income-generating asset offers yield exceeding 6% at a tax-advantaged rate Preferred securities offer investors a blend of fixed-income and stock characteristics, providing an income stream with yields often exceeding 6% and potential tax advantages on dividends. Despite their sensitivity to interest rate fluctuations due to long or perpetual maturities, they can be a valuable addition to a diversified portfolio. Investors should manage concentration risk, as financial institutions and utilities are common issuers, and consider ETFs for broader exposure.

• Preferred securities offer attractive yields, often above 6%, with tax-advantaged income potential.
• They combine characteristics of bonds and stocks, trading on exchanges but providing regular income.
• Their long or perpetual maturity makes them sensitive to interest rate changes, affecting their prices.
• Income from preferreds may be treated as qualified dividends, taxed at lower rates than bond interest.
• Investors should treat preferreds as a complementary asset within a diversified portfolio, not a core holding.
• Managing concentration risk is crucial, as financial institutions and utilities are frequent issuers.
• ETFs like VanEck Preferred Securities ex Financials ETF (PFXF) and iShares Preferred and Income Securities ETF (PFF) offer diversified exposure.