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The InfraCap REIT Preferred ETF (NYSEARCA:PFFR) is specifically designed for investors looking to gain exposure to REIT preferred shares. With a solid and stable 7.9% dividend yield, PFFR is an attractive investment option. However, due to its narrow focus on a small market niche, it is advisable to maintain relatively small position sizes.
PFFR – Basics
– Investment Manager: Infrastructure Capital Advisors
– Underlying Index: Indxx REIT Preferred Stock Index
– Dividend Yield: 7.86%
– Expense Ratio: 0.45%
– Total Returns 5Y CAGR: 1.26%
PFFR – Overview and Analysis
PFFR is an ETF that focuses on REIT preferred shares, which offer investors high yields but come with some level of risk. The fund’s underlying index includes all U.S. REIT preferred shares meeting specific criteria, with securities yielding less than 3.0% being excluded. Being a niche fund, PFFR lacks diversification and its performance may differ significantly from broader bond or preferred indexes.
Credit Risk Analysis
PFFR’s credit quality is relatively low, with most securities lacking credit ratings. The average rating is BBB-, the lowest investment-grade rating. Unrated securities are typically riskier, suggesting that PFFR’s securities may have a level of risk similar to BB or B rated preferred shares.
Interest Rate Risk Analysis
Preferred shares, like bonds, are exposed to interest rate risk. PFFR experienced above-average losses in 2022 when interest rates rose, indicating moderate to average interest rate risk. The fund’s performance since then has been relatively strong, outperforming the average bond.
Dividend Analysis
PFFR offers a strong 7.9% dividend yield, higher than most bonds and preferred shares. The fund’s dividends have remained stable since transitioning to monthly payments in early 2020. Dividends seem sustainable, although coverage ratios have fluctuated in the past.
Performance Track-Record
PFFR’s performance track-record is satisfactory, with average long-term returns. The fund’s returns were impacted by losses during the pandemic and rate hikes in 2022. Prospective returns appear promising, driven by high dividend yields and favorable market conditions.
In conclusion, PFFR presents an opportunity for investors seeking exposure to REIT preferred shares with a strong dividend yield. It is important to consider the fund’s risks and maintain appropriate position sizes to mitigate potential underperformance.
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