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ETF (Ticker PFF)
In our quest for new investment opportunities, our club is looking at an ETF (Ticker PFF).  We're wondering if any of the other clubs have experience with this investment?  Specifically, are there any hassles come tax time?
 
The dollar value of this stock is generally pretty steady at around $39 but they pay a monthly dividend that averages around 6% annually.  I'd appreciate your comments if you've invested in this preferred stock.
 
Thanks,
Dick Lewis
GMIC    
We have experimented with two ETFs (SOCL, social media; water resources) and did not run into any accounting or tax problems. We decided we liked individual stocks better; we watched the top 10 holdings in the ETFs and then decided if and which ones we'd like to own.

On Wed, Jul 1, 2015 at 10:58 AM, Dick Lewis <rlewis21@nc.rr.com> wrote:
In our quest for new investment opportunities, our club is looking at an ETF (Ticker PFF). We're wondering if any of the other clubs have experience with this investment? Specifically, are there any hassles come tax time?
The dollar value of this stock is generally pretty steady at around $39 but they pay a monthly dividend that averages around 6% annually. I'd appreciate your comments if you've invested in this preferred stock.
Thanks,
Dick Lewis
GMIC

Thanks,
 
Dick
 
Sent: Wednesday, July 01, 2015 12:35 PM
Subject: Re: [club_cafe] ETF (Ticker PFF)
 
We have experimented with two ETFs (SOCL, social media; water resources) and did not run into any accounting or tax problems. We decided we liked individual stocks better; we watched the top 10 holdings in the ETFs and then decided if and which ones we'd like to own.
 
On Wed, Jul 1, 2015 at 10:58 AM, Dick Lewis <rlewis21@nc.rr.com> wrote:
In our quest for new investment opportunities, our club is looking at an ETF (Ticker PFF).  We're wondering if any of the other clubs have experience with this investment?  Specifically, are there any hassles come tax time?
 
The dollar value of this stock is generally pretty steady at around $39 but they pay a monthly dividend that averages around 6% annually.  I'd appreciate your comments if you've invested in this preferred stock.
 
Thanks,
Dick Lewis
GMIC    
 

Hi Dick,

Don't forget that you need to focus on the change in the value of your shares as well as the yield for this type of investment. Looking at yields alone can be misleading.

Preferred stock has many characteristics of a bond. In a rising interest rate environment, shares of preferred stock (or this ETF), will fall in value. This would reduce your effective yield.

So it probably isn't something that will bring you quite the net fixed income that you are anticipating.

Here's a good writeup on the effect of interest rate changes on bond prices. It would apply also to Preferred stock.

Why Rising Interest Rates are Bad For Bonds

Laurie Frederiksen
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On Wed, Jul 1, 2015 at 12:53 PM, Dick Lewis <rlewis21@nc.rr.com> wrote:
Thanks,
Dick
Sent: Wednesday, July 01, 2015 12:35 PM
Subject: Re: [club_cafe] ETF (Ticker PFF)
We have experimented with two ETFs (SOCL, social media; water resources) and did not run into any accounting or tax problems. We decided we liked individual stocks better; we watched the top 10 holdings in the ETFs and then decided if and which ones we'd like to own.
On Wed, Jul 1, 2015 at 10:58 AM, Dick Lewis <rlewis21@nc.rr.com> wrote:
In our quest for new investment opportunities, our club is looking at an ETF (Ticker PFF). We're wondering if any of the other clubs have experience with this investment? Specifically, are there any hassles come tax time?
The dollar value of this stock is generally pretty steady at around $39 but they pay a monthly dividend that averages around 6% annually. I'd appreciate your comments if you've invested in this preferred stock.
Thanks,
Dick Lewis
GMIC

Thanks Laurie.  Your comments are helpful.  I agree that the history of this stock may be misleading in terms of what the future may hold.  We've looked at what has been a pretty consistent 6% dividend for a number of years.... but that has also been during periods of unusually low interest rates.  Your point about this being similar to a bond is something we had not considered.  With interest rates trending upward, we need to factor this into our decision process.
 
Dick
 
Sent: Wednesday, July 01, 2015 1:36 PM
Subject: Re: [club_cafe] ETF (Ticker PFF)
 

Hi Dick,

Don't forget that you need to focus on the change in the value of your shares as well as the yield for this type of investment.  Looking at yields alone can be misleading.

Preferred stock has many characteristics of a bond.  In a rising interest rate environment, shares of preferred stock (or this ETF), will fall in value.   This would reduce your effective yield.

So it probably isn't something that will bring you quite the net fixed income that you are anticipating.

Here's a good writeup on the effect of interest rate changes on bond prices.  It would apply also to Preferred stock.

Why Rising Interest Rates are Bad For Bonds

Laurie Frederiksen
Invest with your friends!
www.bivio.com

Become our Facebook friend!  www.facebook.com/bivio
Follow us on twitter!  www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list.  Click here to  Unsubscribe

 
 
On Wed, Jul 1, 2015 at 10:58 AM, Dick Lewis <rlewis21@nc.rr.com> wrote:
In our quest for new investment opportunities, our club is looking at an ETF (Ticker PFF).  We're wondering if any of the other clubs have experience with this investment?  Specifically, are there any hassles come tax time?
 
The dollar value of this stock is generally pretty steady at around $39 but they pay a monthly dividend that averages around 6% annually.  I'd appreciate your comments if you've invested in this preferred stock.
 
Thanks,
Dick Lewis
GMIC