The stock market looks uncertain, slow growth will be with us for years, bonds look risky and I want to make sure I can get my 5 – 8% Safe and Stable Income. I am drawn to Preferred Stocks because of their focus on delivering regular dividend payments.
These preferred stocks tend to be boring, they just sit there flat as a pancake and generate income for us.
Check out the chart below, since 1997, the yield on preferreds has averaged nearly 2.4% higher than the yield of corporate bonds, and 5.7& higher than common stocks. There has not been a single year on this chart where stocks or bonds has yielded more than preferreds.
So how safe are preferred stock dividends, safer than common stock dividends. Preferred stocks are positioned between common stocks and bonds. See the chart below:
Most commonly preferred shares carry no voting rights but have a higher claim to earnings than common share and are usually less volatile than common. When the S&P 500 fell 37% in 2008, for example, the iShares preferred fund fell only 24%. Investors can easily choose from preferred stock ETF’s or individual stocks.
I happen to like the safety of financial based preferred stocks. Here are my current holding, they represent 28% of my IRA portfolio.