Virtus InfraCap US Preferred Stock ETF

PFFA

Market cap $2.48B

The Virtus InfraCap U.S. Preferred Stock ETF (NYSEARCA:PFFA) pays $0.1725 per share every month, which works out to roughly a 9.9% forward yield at a recent share price near $21.

Chasing unsustainable high yields can give investors a false sense of progress toward retiring on dividends. Popular funds like SCHD offer safety but only 3% to 3.5% yields, stretching out the timeline to retire on dividends longer than the traditional 4% rule allows. I detail some 7-10% yields that look built to last.

If you own Virtus InfraCap U.S. Preferred Stock ETF (NYSEARCA:PFFA) for the income, the question that matters is whether that fat distribution will still be there next year.

The bar for including securities that come in a fund-like wrapper is high, as they come with an inherent fee drag. Plus, it is more difficult to develop a high-conviction case on an instrument that consists of, oftentimes, hundreds of underlying securities. However, there are certain areas of the market and asset classes where ETF (and CEF) solutions make sense.

Preferred shares offer high-priority contractual distributions like debt while capturing juicy equity yields backed by strict common dividend suspension rules. Unlike standalone companies or closed-end funds, PFFA's ETF structure ensures you can exit at or near NAV at any moment. Outperforming the Index: Active capital allocations and a disciplined overlay of modest leverage have allowed PFFA to aggressively crush passive index peers.

The iShares Preferred and Income Securities ETF (PFF) remains the largest preferred stock ETF on the market, managing approximately $13.17 billion in assets under management.

Michael Douglas' Oscar winning performance as Gordon Gekko in Wall Street (1988) had many of the best lines.

Virtus InfraCap U.S. Preferred Stock ETF targets income investors seeking high recurrent yield via active management and leverage. PFFA has outperformed passive peer PFF in total returns due to higher distributions, but both funds exhibit negative price returns and capital erosion. PFFA's current distribution exceeds its 30-day SEC yield and recent net investment income, signaling unsustainable payout levels and elevated risk of future cuts.

For the quarter, the Virtus InfraCap U.S. Preferred Stock ETF returned -3.39% on NAV, while the Fund's benchmark, the S&P U.S. Preferred Stock Index, returned -2.36%. The effect of selection contributed 1.23% to the return, and allocation detracted -1.27%, while leverage and related interest expenses detracted -0.80%. The Fund's relative underperformance was largely impacted by its overweight in certain financial services preferred stocks, which were hurt by concerns surrounding private credit markets.

Virtus InfraCap U.S. Preferred Stock ETF offers a forward yield of 9.69%, significantly outpacing the 12-month Treasury bill's 3.91%. PFFA's active management, use of leverage, and options overlay drive consistent outperformance versus passive preferred ETFs and its benchmark index. The fund's monthly distributions have increased six times since 2020, with capital preservation and reliable income prioritized over capital appreciation.