VanEck Preferred Securities ex Financials ETF

PFXF

Market cap $2.39B

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.

The VanEck Preferred Securities ex Financials ETF (NYSEARCA:PFXF) has quietly become one of the better-performing income vehicles of the past year, returning 21% over the trailing 12 months and 8% year to date through May 7.

More than 50% of PFXF's assets are Mandatorily Convertible. They are effectively a bet on the common shares of the issuer without full upside. Many now trade at a substantial premium, and downside protection is limited at these levels. Income investors should be aware that dividends of the underlying assets are PIKable.

VanEck Preferred Securities ex Financials ETF (NYSEARCA:PFXF) has drawn income investors with its monthly distributions and a structure that deliberately sidesteps the banking sector.

If you're looking for monthly dividends with high yields, there are more ways to derive that income without chasing significant risk.

Many investors are looking to reduce equity volatility while adding more non-Treasury income to their portfolios. In this environment, preferred stocks and the related ETFs may be valid considerations.

Many don't realize a hidden tech bloodbath is going on, especially as people's attention is on oil prices and the bigger fish in the market.

VanEck Preferred Securities ex Financials ETF offers preferred stock exposure without bank sector risk. That's appealing amid current financial sector uncertainties. PFXF has outperformed PFF since 2020, but its portfolio is concentrated in individual issuers, like Boeing, Albemarle, and Strategy, introducing idiosyncratic credit risk. While PFXF's 6.87% dividend yield is attractive, concentrated positions in volatile or speculative credits may erode NAV over time.

VanEck Preferred Securities ex Financials ETF offers exposure to non-financial preferreds with a competitive 6.78% yield and monthly distributions. PFXF's exclusion of financials, high duration, and significant issuer concentration, especially Boeing, make it sensitive to interest rates and credit spreads. The fund is attractive when long Treasury yields are high and S&P 500 earnings yield is compressed, but widening credit spreads could pressure prices, especially for lower-rated holdings.

Preferred securities offer income potential above bonds and lower volatility than equities. Understanding sector differences helps investors position preferreds within diversified portfolios.