
S&P U.S. Preferred Stock Index - 7-8% yield, what's the catch? - tocomment
http://us.ishares.com/product_info/fund/overview/PFF.htm
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patio11
One major risk is heavy concentration in the financial sector, presumably
because banks use preferred stock much more frequently and at higher yields
than other companies. Bank of America (disclaimer: shareholder) has something
like a dozen or more share classes. Some of them had very attractive yields a
few years ago -- and still have attractive yields, but lost 80%+ of the value
over the interim. (Note there is a risk of non-payment of the dividend, and in
some cases it will never be payed.)

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tocomment
So the market must think it's very risky then. I wonder if there are any other
risks.

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tocomment
How can a fund made up of S&P 500 stocks have this high of a yield? It's
higher than BP's yield.

Are there risks with preferred stocks or this index that I'm not aware of? I
can't seem to find much information online.

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awa
[http://www2.standardandpoors.com/spf/pdf/index/SP_US_Preferr...](http://www2.standardandpoors.com/spf/pdf/index/SP_US_Preferred_Stock_Index_Methodology_Web.pdf)

The S&P U.S. Preferred Stock Index is designed to serve the investment
community’s need for an investable benchmark representing the U.S. preferred
stock market. Highlights The index is comprised of U.S. traded preferred
stocks that meet criteria relating to minimum size, liquidity, exchange
listing and time to maturity. The index is calculated with a modified
capitalization weighted scheme, with modifications being made to index shares
to prevent single stock concentration and improve index liquidity. The index
is rebalanced once a year, in September, when index shares and constituents
are reviewed. Corporate actions such as maturity, conversion, calls and
delistings are treated according to a set of rules further defined in this
document.

