Preferred stocks, often overlooked, can yield up to 9.9%, making them an attractive option for dividend investors. These hybrid instruments typically pay dividends at rates 2x to 3x more than common stocks, with average yields in the mid- to high single digits. Recent reports highlight the discounts on preferred stock investments, with some funds trading for as little as 89 cents on the dollar.
Key players in this space include the John Hancock Premium Dividend Fund (PDT) with a distribution rate of 7.6%, the Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund (PTA) offering 8.3%, and the Nuveen Variable Rate Preferred & Income Fund (NPFD) yielding 9.9%. PDT, for instance, is trading at an 11% discount to its net asset value, while PTA currently has a 7% discount. NPFD, recognized for its competitive yield, holds approximately 85% in fixed-to-fixed rate securities.
Investors can leverage these closed-end funds (CEFs) for potentially higher returns, enjoying discounts up to 11% while securing steady monthly dividends. Such an investment could translate to annual income of around $54,000 for a $600,000 portfolio, emphasizing the potential for preferred stocks in dividend-focused strategies.
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