Forget Individual REITs: $14.2 Billion ETF Offers 6.4% Monthly Dividends With Lower Risk

Core Viewpoint - iShares Preferred and Income Securities ETF (PFF) offers a 6.4% yield through investments in U.S. preferred stocks and income-producing securities, with a focus on providing monthly income from a diversified portfolio [1][4]. Fund Overview - PFF has $14.2 billion in assets and has been operational since 2007, providing consistent monthly distributions [1]. - The fund charges a 0.45% expense ratio and does not employ leverage [1]. Income Generation - PFF generates its yield by collecting fixed dividend payments from preferred stocks, which are distributed monthly to shareholders [5]. - Monthly distributions have varied between $0.16 and $0.18 per share in 2025, totaling approximately $2.06 annually [6]. Distribution Characteristics - The fund has maintained consistent monthly payments since inception, although the amounts can fluctuate quarterly due to the varying payment schedules of underlying securities [6]. - PFF's low portfolio turnover of 20% indicates stable holdings, which helps reduce transaction costs [9]. Risks and Sensitivities - The primary risk to PFF's dividend sustainability is its sensitivity to interest rates, as rising rates typically lead to falling prices for preferred stocks [7]. - The Federal Reserve's monetary policy directly impacts the valuations of preferred stocks and the attractiveness of new issuances [7]. Performance Insights - PFF's total return history highlights the importance of considering both yield and price movement, with the fund's price showing stability despite fluctuations in individual high-yield securities [8]. - Preferred stocks generally underperform during periods of rising rates and credit stress, even though they provide higher current income compared to investment-grade bonds [9]. Alternative Investment - For investors seeking similar income with different risk characteristics, the SPDR Portfolio High Yield Bond ETF (SPHY) offers a 6.8% yield through corporate high-yield bonds, with a significantly lower expense ratio of 0.05% [10].