In our last blog post, we discussed what are preferred stocks. Now let's examine why preferred stocks are attractive for some investors.
In short, preferred stocks are attractive due to their high and stable yields, and good returns in low interest rate environment.
As we have discussed, preferred stocks either have no fixed maturity or come due far in the future, so they tend to perform like bonds, with share prices move up or down with changes in long term interest rates.
Thanks for the low interest rates, preferred stocks have performed well - so far in 2014 (by end of Oct), the US Preferred Stock Index has returned 11.65%, handily beating both S&P stock and bond markets, with yields at 6.85% (end of Oct), no wonder it's very attractive for people who are seeking high yields.
But, be careful, preferred stocks definitely are not for everyone. Even for the right investors, it's best to just allocate a small portion of portfolio to preferred stocks.
Next blog post will discuss why.
In short, preferred stocks are attractive due to their high and stable yields, and good returns in low interest rate environment.
As we have discussed, preferred stocks either have no fixed maturity or come due far in the future, so they tend to perform like bonds, with share prices move up or down with changes in long term interest rates.
Thanks for the low interest rates, preferred stocks have performed well - so far in 2014 (by end of Oct), the US Preferred Stock Index has returned 11.65%, handily beating both S&P stock and bond markets, with yields at 6.85% (end of Oct), no wonder it's very attractive for people who are seeking high yields.
But, be careful, preferred stocks definitely are not for everyone. Even for the right investors, it's best to just allocate a small portion of portfolio to preferred stocks.
Next blog post will discuss why.
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