Deep Dive: Dividend yields on preferred stocks have soared. This is how to pick the best ones for your portfolio.

by | Sep 29, 2022 | Stock Market

This year nearly every type of security has declined — bad news if you look at your portfolio’s value each day and have difficulty sleeping at night. On the other hand, it’s good news if you’re looking for income. Why is it good news?

Because the rising interest rates mean falling prices for bonds and preferred stocks. For those income-oriented securities, low prices mean higher yields for investors who buy now and possibly — or even probably — higher capital gains down the road. This year has been brutal for funds that invest in bonds and preferred stocks. But any income investor must expect securities’ market values to move in the opposite direction of interest rates. These instruments are only appropriate for long-term investors who want income. They are not designed for quick gains. The Invesco Financial Preferred ETF’s
share price is down 20% in 2022. It pays a monthly dividend that has oscillated between 7.1 and 7.2 cents a share over the past year. If we go with the 7.1 cents and the closing price of $15.04 on Sept. 28, the current yield for a new investor is 5.66%. At the end of 202 …

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