How to Earn Up to 7% Yield with Preferred Stocks

These odd stock-bond hybrids can deliver big returns. Consider buying them through an ETF to help spread the risk.

Preferred stocks straddle the gap between stocks and bonds. They trade like stocks, usually near their issue price (generally $25 a share). But they pay fixed dividends and can be “called”—redeemed by the issuer—at set intervals. Payments from many preferreds are considered “qualified dividends” and receive favorable tax treatment; most people pay just 15% to Uncle Sam on their preferred payouts. Unlike bonds, which mature on specified dates, most preferreds have no set repayment date.

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Contributing Writer, Kiplinger's Personal Finance
Carolyn Bigda has been writing about personal finance for more than nine years. Previously, she wrote for Money, and is a regular contributor to the Chicago Tribune.