Want $10,000 a Year on $100K? This Preferred-Stock Fund Pays It Monthly

Investors who bought the iShares Preferred & Income Securities ETF (NASDAQ:PFF) did so for one reason: steady monthly income from a diversified pool of preferred stocks, without picking individual issues. PFF is the largest preferred ETF on the market at roughly $13.1 billion in assets, charges 0.45%, and has paid a monthly distribution since 2007. The problem is the paycheck. At a 5.65% dividend yield, a $100,000 stake in PFF generates roughly $5,650 a year. For a reader who wants closer to $10,000 on the same balance, an actively managed cousin from Virtus deserves a look.

What PFF Actually Delivers

PFF tracks the ICE Exposure-Weighted U.S. Preferred Stock Index, which is dominated by bank and insurance preferreds. The top of the book reads like a who’s who of U.S. financials, with large positions across Bank of America, JPMorgan, Morgan Stanley, and Goldman Sachs preferred series. The exposure is diversified, the beta is low, and the price barely moves. That is the appeal and the ceiling.

The most recent monthly distribution came in at $0.1423 per share, paid in August 2026. Total return has been muted: about 2.6% over the past year, with the fund trading near its 52-week low. In a world where the 10-year Treasury now yields close to 5%, PFF’s income advantage over risk-free bonds is narrower than most holders realize. That compressed spread is central to why income seekers feel the need to look further up the risk spectrum.

The Yield Gap Is Structural

The passive index fund buys what the index tells it to buy, weighted by float. That means it holds a lot of investment-grade bank preferreds that price at low spreads and clip modest coupons. The Virtus InfraCap U.S. Preferred Stock ETF (NYSEARCA:PFFA) does two things differently, and both flow directly to the distribution.

First, PFFA is actively managed with roughly 188 holdings selected for yield and mispricing rather than index weight. The portfolio leans into higher-coupon issues from mortgage REITs, hotel REITs, energy midstream, and specialty finance, sectors that PFF barely touches. Second, PFFA employs modest leverage, typically in the 20% to 30% range. That combination produces a trailing twelve-month yield near 9.8% versus PFF’s 5.65%.

The math the headline promises: at roughly 9.8%, $100,000 in PFFA yields close to $9,800 per year, delivered in monthly checks of about $493, based on the current $0.1725-per-share distribution. That is nearly double what PFF pays on the same principal.

What You Give Up

The active, leveraged structure costs more. PFFA’s expense ratio is 2.48%, versus 0.45% for PFF. That gap is real, though it is already deducted from the distribution yield quoted above. The bigger tradeoff is drawdown risk. Leverage amplifies losses when preferred prices fall, as was seen acutely in 2022. PFFA’s beta is still low relative to equities, but higher than PFF’s, and the fund’s $2.45 billion asset base, while growing steadily, means wider bid-ask spreads on volatile days than a giant index fund would face.

The performance case has held up. PFFA has returned about 6.2% over the past year and roughly 5.9% annualized over five years, both numbers that include a sizable income component. The macro backdrop has grown more complicated since the original version of this article: the 10-year Treasury yield has climbed to nearly 5%, a level last seen in October 2023, as markets price in a likely Federal Reserve rate hike at the September 16, 2026 meeting. The Fed has held the federal funds rate in the 3.50% to 3.75% range since December 2025, but three dissenting FOMC members at the July 2026 meeting voted for an immediate hike, and markets now widely expect one before year-end. A renewed hiking cycle would hit PFFA harder than PFF, given the leverage. For preferred-stock holders, rising long-end yields also compress price appreciation prospects, which is why the distribution yield is doing most of the performance heavy lifting right now.

Distributions from both funds are a mix of qualified dividend income and ordinary income, so the tax profile in a taxable account is similar in character but larger in absolute dollars with PFFA. Readers considering a switch inside a taxable brokerage account should model any embedded capital gain in their existing PFF position before selling. Income seekers exploring monthly payers can find more ideas in our report on stocks that pay monthly.

Weighing the Swap

PFF is a fine core preferred holding for capital preservation with a modest income kicker. PFFA is a different instrument: higher income, higher fees, and more sensitive to credit and rate shocks. Given that the Fed may be shifting back toward tightening amid persistent inflation and energy-price pressures, the rate environment adds a new layer of risk to consider for the leveraged fund. A full swap makes sense for an investor whose primary goal is maximum monthly cash flow and who can tolerate a deeper drawdown in a weak market. A partial rotation, say half the position, captures most of the income lift while keeping some low-beta ballast. The choice depends on whether the extra $4,000 or so per $100,000 is worth the rate and leverage exposure that comes with it.

Editor’s note: This article has been updated to reflect current fund data, including PFF’s AUM of approximately $13.1 billion, its revised 5.65% yield and $0.1423 per-share August distribution, PFFA’s updated AUM of $2.45 billion, holding count of approximately 188 securities, and expense ratio of 2.48%. The 10-year Treasury yield was also refreshed to reflect its current level near 5%, and the Fed policy section was updated to note the three dissenting July 2026 FOMC votes and the market expectation of a September 2026 rate hike.

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