Are we actually out of the woods yet on bank issues? The contagion seemed to reappear this week impacting PacWest Bancorp (PACW) and First Horizon (FHN). At the same time, during his rate update conference, Federal Reserve chair Jerome Powell shared that deposit flows at banks had eased. Should regional banks be nearing a bottom, it could be a good time for buying low on preferreds in an ETF like the American Century Quality Preferred ETF (QPFF).
Preferreds can be a solid and reliable part of any investor’s portfolio, offering premium yields and dividends for those investors who get access to them. Traditionally, banks, including regional banks, are big players in the preferreds space, and with regional banks taking such a shellacking, now could be an appealing entry point for investors and advisors curious about preferreds.
While in the long term preferreds make sense, what about for the rest of this year? The yield curve may be worth keeping a close eye on given its impact on the lending environment for bank. If the current inversion of long term and short term yields gets closer to cooling off, that would be a telling detail for the overall health of the banking sector.
See more: “Get Non-Bank Preferred Stocks in QPFF“
QPFF presents an intriguing option for those interest in buying low on preferreds given the situation banks are in. Given their “preferred” status, they aren’t as cheap as other stocks, so a discount isn’t often available, but QPFF has an added benefit. The quality ETF actually has somewhat less bank exposure compared to other preferred-focused strategies, so while it does provide inventors and advisors exposure to the space, it’s diversified more. Add that to its provision of income to beleaguered managers, and the case for QPFF grows.
“Amid potentially shifting monetary, advisors have been seeking out actively managed strategies that can help generate income in a risk-controlled manner,” said VettaFi’s head of research, Todd Rosenbluth.
For those investors and advisors looking for income from yields and dividends that may be available at a cut price, QPFF could be worth considering. Charging 32 basis points, the ETF is actively managed and has seen a big flows uptick, rising to $45 million in AUM behind nearly $20 million in one month net inflows. With a 5.8% annual dividend yield, it may be a versatile tool for all types of portfolios in the months to come.
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