Investors who want to make money were reassured this week when the InfraCap REIT Preferred ETF (NYSE Arca: PFFR) kept its monthly payout rate at $0.12 per share. The January 30th payout is the same as other 2023 payouts from the real estate-focused fund.
The consistency of PFFR comes at a good time, as markets are shaking up before the Fed’s choice, which most people expect, to stop raising interest rates. The fund’s 7.2% SEC yield is still much higher than that of other fixed-income assets, which makes it a great choice for investors who are looking to retire soon.
As advisors reevaluate their clients’ allocations, PFFR offers stable, diverse income backed by new issues of preferred shares from top US REITs.
Dividends are usually how most real estate investment trusts give their gains back to their common shareholders. However, REITs also issue preferred shares to get money for projects that will help them grow.
When it comes to dividends and assets, these preferred shares are more valuable than ordinary shares, but they are also less volatile. REIT preferreds give investors a better chance of making money with less risk, but the upside is lower than with commons.
But even REIT preferred shares struggled in 2022, when the market as a whole was in a lot of trouble. As the Federal Reserve raised rates quickly, buyers ran away from assets with longer terms, no matter how good they were.
Still, it looks like things are coming around in favor of plays with higher yields, like REIT preferred shares. Since the Federal Reserve is giving signs that it will slow down on rate hikes, investors are once again interested in assets that are higher risk.
In this situation, some advisors and analysts say that the present price of REIT preferreds is too low. As the difference between prices and historical trends narrows, PFFR is a good way to get into this rebound.
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But figuring out the correct value of REIT preferred shares takes a lot of study and close attention. Because of how they are structured, they have different risks than regular company bonds. Before investing, you need to think about a lot of things, from the issuer’s assets to the embedded options.
Luckily, PFFR makes selection easier for investors who aren’t as knowledgeable thanks to active management. Manager InfraCap Investment Management uses their years of experience with fixed income and stocks to make the strategy fit the client’s needs. This lets individual investors who are focused on income take advantage of REIT preferred growth.
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Of course, there is still a chance of volatility as the markets get ready for the June Fed meeting and new rate instructions. As with any business that aims to earn money, consistency is still important for long-term compounding.
In this area, PFFR has now paid out 24 straight $0.12 monthly dividends. Because it is reliable, buyers feel good about planning for the 7.2% trailing year yield in their retirement budgets. With REIT preferred tailwinds possibly just around the corner, PFFR should be on everyone’s watch.