A Preferred ETF for a Fat Payout

This PowerShares fund generates a 6.5% yield by investing in preferred stocks.

It’s little surprise that income hunters have turned to preferred securities—hybrid investments that are part bond, part stock. Over the first nine months of 2012, investors poured $518 million more into PowerShares Preferred Portfolio (symbol PGX) than they took out. Their interest wasn’t a surprise in light of the exchange-traded fund’s hefty 6.5% yield.

In response, PowerShares decided to adopt a broader underlying index—the BofA Merrill Lynch Core Plus Fixed Rate Preferred Securities index—to expand the available choices of preferreds. The new benchmark allows the fund to invest in companies with below-investment-grade ratings (double-B and lower), a category its previous index barred.

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Nellie S. Huang
Senior Associate Editor, Kiplinger's Personal Finance

Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.