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Preferred Stocks and Preferred Income Funds Offer High Yields

A preferred stock trades like a stock but offers income like a bond. Preferreds are attractive because their yields are usually higher than corporate bonds of similar credit ratings. And preferred dividends are taxed at a lower rate than corporate bonds. Like bonds, preferred stocks usually trade in a narrow price range, but they can experience significant prices declines.

You can find information about specific preferred stocks at QuatumOnline, a free site. Or check with your broker.

In addition to individual preferred stocks, you can invest in convenient closed-end funds and exchange-traded fund that feature preferred stocks.

Here is a sample of 8 preferred income closed-end funds.


Preferred Income CEFs
Stock
Price Quote & Dividend
Interactive Price Chart
BlackRock Credit Allocation Income Trust IV 
Flaherty & Crumrine Preferred Income Fund
Flaherty & Crumrine Preferred Income Opportunity Fund
John Hancock Preferred Income Fund
John Hancock Preferred Income Fund II
John Hancock Preferred Income Fund III
Nuveen Quality Preferred Income Fund 2
Nuveen Quality Preferred Income Fund 3


To follow the day-to-day progress of the Preferred Income CEFs portfolio, check out the returns table and chart below. Dollar values are computed using weekly closes for stocks from Yahoo! Finance.

The 7 stocks included in the value computations are: PFD, PFO, HPI, HPF, HPS, JPS and JHP. The current value of the portfolio assumes that $1,428.57 was invested (total of $10,000) in each stock at its closing weekly price for the first week of January 2004. BTZ was excluded from the chart computations because of insufficient price data.


Preferred Income CEFs - Return Results
Portfolio:
Preferred Income CEFs
Start date:
Jan-02-2004
Start value:
$10,000
End date:
May-21-2013
End value:
$18,130
Number prices
491
Minimum value occurred on Oct-06-2008
$3,480
Maximum value occurred on May-06-2013
$18,197
Total gain or loss (Start date to End date)
81.30%
Annualized gain or loss (Start date to End date)
6.50%
Sharpe Ratio
0.56
Total dollar value on End date of a $10,000 purchase made on Start date
$18,130
Average percent return for all possible buy/sell combinations
22.92%
Number returns
120,295
Number profitable returns (Winners)
86,566
Percent profitable returns
71.96%
Number unprofitable returns (Losers)
33,729
Percent unprofitable returns
28.04%
Winners to losers ratio
2.57


Click chart to enlarge it.



Related Article

Preferred Exchange-Traded Funds (ETFs)
Preferred Stocks Deliver High Yields