Forget Individual REITs: $14.2 Billion ETF Offers 6.4% Monthly Dividends With Lower Risk

iShares Preferred and Income Securities ETF (NYSEARCA:PFF) offers investors a 6.4% yield by investing in U.S. preferred stocks and income-producing securities. With $14.2 billion in assets and an 18-year track record since 2007, PFF provides monthly income through a diversified portfolio of preferred securities issued primarily by financial institutions and REITs. The fund charges a 0.45% expense ratio and maintains no leverage.

Preferred stocks occupy a middle ground between bonds and common equity. They pay fixed dividends like bonds but trade on stock exchanges and can appreciate or decline in value. PFF generates its yield by collecting these fixed dividend payments from its holdings and distributing them monthly to shareholders. However, these distributions fluctuate based on the portfolio’s composition and the payment schedules of underlying securities.

Distribution Reliability and Interest Rate Sensitivity

PFF’s monthly distributions have ranged from $0.16 to $0.18 per share throughout 2025, totaling approximately $2.06 annually. This variability is normal for preferred stock ETFs, as different holdings pay on different schedules and rates adjust over time. The fund has maintained consistent monthly payments since inception, though amounts fluctuate quarter to quarter.

The primary risk to PFF’s dividend sustainability is interest rate sensitivity. Preferred stocks behave similarly to bonds—when interest rates rise, their prices typically fall, and vice versa. The Federal Reserve’s monetary policy directly impacts preferred stock valuations and the attractiveness of new issuances versus existing holdings. Additionally, if underlying issuers face financial stress, they may suspend preferred dividends, reducing PFF’s income.

PFF’s total return history shows the importance of considering both yield and price movement. While the 6.4% yield provides steady income, the fund’s price has traded in a tight range recently, moving just $0.005 on December 10 within a 14-cent daily range. This stability contrasts sharply with individual high-yield securities, which can experience significant volatility.

The fund’s low portfolio turnover of 20% suggests stable holdings, reducing transaction costs and providing consistency. However, preferred stocks generally underperform during periods of rising rates and credit stress, even as they provide higher current income than investment-grade bonds.

Alternative: SPDR Portfolio High Yield Bond ETF

For investors seeking similar income with different risk characteristics, the SPDR Portfolio High Yield Bond ETF (NYSEARCA:SPHY) offers a 6.8% yield through corporate high-yield bonds rather than preferred stocks. SPHY generates income from bond coupon payments across a diversified portfolio of below-investment-grade corporate debt. With a 0.05% expense ratio, SPHY provides comparable yield to PFF at significantly lower cost. The fund’s income derives from credit risk rather than equity-like preferred structures. SPHY currently yields 6.8% and has demonstrated consistent monthly distributions, making it worth considering for income-focused investors evaluating alternatives to preferred stock exposure.