PFXF: Know What You Are Buying -- These Are Not Your Father's Preferred Shares
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.
PFXF's 6.6% Yield Still Looks Safe as it Skips Banking Sector's Biggest Dividend Risks
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.
This Preferred ETF Deserves Preferential Treatment
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.
PFXF: Trading Banking Sector Issues For Idiosyncratic Risks
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.
PFXF Challenges The S&P 500's Earnings Yield 6%
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.
PFXF: An Attractive Risk-Reward Heading Into 2026
VanEck Preferred Securities ex Financials ETF maintains a high 67.3% allocation to securities maturing in 30 years or more. This should provide a tailwind for returns in 2026 should U.S. 30-year yields decline, driven by the potential conclusion of Fed policy normalization. U.S. GDP growth is projected to accelerate in 2026, indicating a manageable credit risk environment for non-investment grade securities.
PFXF's Portfolio Breakdown
VanEck Preferred Securities ex Financials ETF offers a diversified portfolio, with $1.89B in assets and a low 0.4% management fee. The fund's core holdings are baby bonds, mandatory convertibles, and fixed-rate preferreds, most trading below par with 6.8%-7.1% yields. Floating and fixed-to-floating rate securities provide higher yields but come with increased risk, making them suitable for risk-tolerant investors.
PFXF May Have Too Much Exposure To Boeing Preferred Shares
PFXF May Have Too Much Exposure To Boeing Preferred Shares
PFXF: Under The Radar Beneficiary Of U.S. Cost Cutting
The VanEck Preferred Securities ex Financials ETF has 64.7% of its portfolio allocated to long-duration preferred securities. The new U.S. administration is focused on cutting the budget deficit to around 3.00-3.50% of GDP, allowing for a stabilization in the debt/GDP ratio. Together with future Fed rate cuts, this should allow risk-free interest rates to decline.
SPY Vs. PFXF: S&P 500 Has Lower Risk Than Preferreds
SPY is expected to offer superior risk-adjusted returns that PFXF and preferred shares throughout 2025. A Monte Carlo simulation seems to demonstrate that SPY has lower downside risk than preferred share ETFs whilst maintaining an asymmetrical upside. Despite valuation and earnings growth risks, SPY could be a better option for investors than fixed income if capital preservation is the main concern.
PFXF: Preferred Stocks ETF Beating Peers, Yet Unattractive
VanEck Preferred Securities ex Financials ETF is invested in US-traded preferred stocks of non-financial companies. PFXF is quite concentrated in its top issuers, and about two-thirds of its assets are below investment grade. PFXF has outperformed its most popular competitors and a high-yield bond index since 2013.
PFXF: A Strong Buy When You Love Preferred Yields Of 7%, But Don't Want Bank Risks
VanEck Preferred Securities ex Financials ETF primarily invests in preferred securities with high yields, avoiding financial stocks. The ETF has $1.69 billion in assets, low expense ratio of 0.41%, and 30-day SEC yield of 6.76%. Exclusion of financial stocks could lead to potential capital gains and high yields over the next few years.
