Quick Read – PFFA yields 8.5% by layering leverage onto preferred stock coupons, backed by 7 straight years of uninterrupted monthly payments through COVID and the 2022 rate shock. – The Fed’s rate cuts lower PFFA’s borrowing costs and widen net spreads, but a renewed hiking…
cle remains the clearest threat to its high distribution. – PFFA’s leverage delivered 9.7% returns over the past year but causes sharper NAV swings than unlevered peer PFF, making it a poor fit for investors prioritizing stable principal. – If you own Virtus InfraCap U.S. Preferred Stock ETF (NYSEARCA:PFFA) for the income, the question that matters is whether that fat distribution will still be there next year
PFFA currently trades near $21 and pays $0.1725 per share each month, which annualizes to roughly $2.07 and puts the yield in the 9.5% neighborhood. That is a hefty payout for a fund holding senior-ranking securities, and PFFA gets there by combining preferred stock coupons with modest leverage. The question this piece answers is whether the math behind that yield is durable or stretched.
How PFFA Manufactures a Near 10% Yield Manager Jay Hatfield runs PFFA as an actively managed portfolio of 188 preferred securities weighted toward financials, real estate, and energy infrastructure, with anchor positions including Apollo Global Management and KKR. Preferred shares sit above common equity in the capital stack and pay fixed coupons, so the underlying income stream is contractual rather than discretionary. Where PFFA differs from a plain-vanilla preferred ETF is the use of modest leverage and derivative overlays to amplify yield.