PFF’s 6.76% Yield Looks Great Until Taxes Cut Five-Year Returns to -1.34% in a Taxable Account

A retiree shopping for income sees one number first on the iShares Preferred and Income Securities ETF (NASDAQ:PFF), a BlackRock (NYSE:BLK | BLK Price Prediction) fund. iShares lists a 30-day SEC yield of 6.76% as of September 30, 2026. For that date, BlackRock iShares reports a five-year average annual total return at NAV of 0.40%. After taxes on distributions, BlackRock iShares puts that five-year figure at -1.34%. All three numbers come from the fund’s sponsor and carry the same date.

The after-tax rows follow a fixed method: the fund’s summary prospectus says they assume the highest historical individual federal marginal income tax rates and exclude state and local taxes. Your own result depends on your bracket.

What Five Years of a Big Yield Delivered

BlackRock iShares’ September 30, 2026 table adds more context. It shows a one-year NAV return of -1.35%, a three-year average of 5.53%, and a ten-year average of 2.80%. BlackRock iShares puts the five-year return after taxes at -1.34%. The ICE Exchange-Listed Preferred and Hybrid Securities Index, the fund’s benchmark, returned 0.81% a year over five years, per iShares. The latest reading from the firm shows a year-to-date NAV total return of -2.08% as of October 15, 2026.

Fees are low: BlackRock iShares states an expense ratio of 0.45% in the prospectus dated July 31, 2026, or $45 a year per $10,000 invested. Portfolio turnover for the latest fiscal year was 20%. The fund held 462 securities as of June 30, 2026, and financial institutions made up 55.79% of market value as of October 15, 2026.

Issuers Decide When Your Best Yields Disappear

The prospectus warns that a company may “call or redeem its preferred stock or convert it to common stock.” It adds: “An issuer may decide to call its outstanding preferred stock in various environments based on its assessment of the relative cost of capital across the company’s capital structure.” The call option belongs to the issuer. The issuer exercises it when doing so is advantageous. Under Income Risk, the sponsor states that the fund’s income may decline if it must reinvest in lower-yielding securities after a holding is called. The fact sheet adds that when the index drops securities because of redemption or call features, the yield of the index and the fund may fall.

Upside Has a Built-In Limit

The prospectus states that hybrid securities “may not fully participate in gains of their issuer and thus potential returns of such securities are generally more limited than traditional equity securities.” For a holder, that means limited participation in the issuer’s growth. You collect the coupon, while the price gains in strong years go mainly to common shareholders.

Rate Spikes Hit Prices Directly

The Interest Rate Risk disclosure says rising interest rates generally push down the value of fixed-income securities. As an example, the calendar-year 2022 NAV return was -18.37%.

The sponsor states calls, limited upside, and rate risk without saying how much of the return any one of them cost. Read them next to the results and decide for yourself.

Taxes Take the Next Layer

The prospectus says distributions may be taxed as ordinary income or capital gains unless the fund sits in a tax-deferred account. The sponsor’s recent distribution history labels the payments as income, with no return of capital.

What the Fund Gets Right

Preferred stock ranks ahead of common stock for dividends and in liquidation. The fund spreads money across hundreds of securities. Its three-year and ten-year records are positive, and the monthly income is real. For an investor who needs current income inside a tax-deferred account and accepts the trade-offs, it can serve a purpose (if you are trying to put together a wider monthly income stream from a lump sum, we laid out the mix, the payment calendar, and the withdrawal order in a free guide here: The Paycheck Portfolio Method).

Who This Fund Suits, and Who Misreads It

The fund’s structure centers on regular payouts rather than growth, and its tax drag matters least inside an IRA. It can mislead the taxable-account buyer who reads the yield as a total return. Five years of sponsor data show that the income has mostly gone to putting back lost value. Before you buy any income fund, open its page on the sponsor’s website, go to the performance tab, and find the rows labeled “after taxes on distributions” and “after taxes on distributions and sale of fund shares.” The same rows appear in the Average Annual Total Returns table in every summary prospectus. These figures are as of September 30, 2026, and they will change at the next quarter end.

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