One of the main reasons investors use exchange-traded funds is to avoid the level of analysis required to select individual securities.
Instead of screening stocks based on metrics such as price-to-earnings ratios, free cash flow, return on equity or revenue growth, investors can buy a passive ETF that tracks an index. That approach provides transparency into how the portfolio is constructed and weighted.
For those willing to pay higher fees, actively managed ETFs offer another option, where portfolio managers and research teams handle security selection and positioning.
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For large-cap U.S. stocks, this convenience may be less compelling since investors have access to screening tools and public data. But in less liquid or more complex areas, ETFs can be more useful.
Fixed income is one example. Bonds trade over the counter rather than on centralized exchanges, and evaluating them requires familiarity with concepts such as yield to maturity, duration and credit ratings. Packaging bonds into an ETF can simplify access and provide diversification.
Preferred shares introduce another level of complexity. “Preferred stocks typically fall ahead of common equity holders and behind senior debt holders in a company’s capital structure,” says Brandon Rakszawski, vice president and director of product management at VanEck.
These securities often have a fixed par value, scheduled dividend payments and accrual features. Many include call provisions that allow issuers to redeem them early, as well as conversion features that can turn them into common stock.
Some preferred shares are cumulative, meaning missed payments must be made up later. Dividend structures can also vary, with some offering fixed rates and others tied to floating benchmarks.
“Individual preferred stocks can be complex, with different maturities, call provisions, conversion features and coupon features to consider,” Rakszawski says.
Given these moving parts, investors interested in preferred shares may find it useful to start with an ETF to understand how the asset class behaves across a full market cycle.
“As hybrid securities, preferred stocks are subject to risks typical of fixed income, such as interest rate risk,” Rakszawski says. “In addition, preferred stocks may be subject to higher credit risk than senior debt holders because of their lower capital structure positioning.”
Here are seven of the best preferred stock ETFs to buy in 2026:
| ETF | Expense ratio |
| Global X U.S. Preferred ETF (ticker: PFFD) | 0.23% |
| iShares Preferred and Income Securities ETF (PFF) | 0.45% |
| Invesco Preferred ETF (PGX) | 0.50% |
| Invesco Variable Rate Preferred ETF (VRP) | 0.50% |
| VanEck Preferred Securities ex Financials ETF (PFXF) | 0.40% |
| Virtus InfraCap U.S. Preferred Stock ETF (PFFA) | 2.11% |
| InfraCap REIT Preferred ETF (PFFR) | 0.45% |
Global X U.S. Preferred ETF (PFFD)
“Preferred shares may be the right choice for investors seeking stability and yield but still wanting equity ownership,” says Rohan Reddy, head of international business development and corporate strategy at Global X ETFs. “A benefit of preferred stocks is that they receive a dividend, which is usually fixed, although some are floating — either way, this helps to ensure owners receive steady cash payments.”
PFFD passively tracks the ICE BofA Diversified Core U.S. Preferred Securities Index. The benchmark currently includes 226 holdings and provides a 6.5% 30-day SEC yield with monthly distributions. The ETF is also one of the more cost-efficient options in the category, charging a 0.23% expense ratio. PFFD has been trading since September 2017 and has grown to just under $2.1 billion in assets.
iShares Preferred and Income Securities ETF (PFF)
PFF is the largest preferred share ETF by assets under management, currently sitting at just over $13.4 billion. iShares has offered this ETF since March 2007, and it tracks the ICE Exchange-Listed Preferred and Hybrid Securities Index. That results in a portfolio of about 460 holdings, currently paying a 6.3% 30-day SEC yield after a 0.45% expense ratio. As with most preferred share ETFs, PFF pays monthly distributions.
PFF follows a fairly typical preferred stock strategy, with heavy exposure to financial institutions, which make up just under 62% of the portfolio. Banks and insurers often issue preferred shares instead of bonds because they can count toward regulatory capital requirements, making them a more flexible funding source. Outside of financials, the portfolio also holds utilities and industrial companies.
Invesco Preferred ETF (PGX)
“PGX provides a more traditional preferred stock exposure, focusing on fixed-rate, $25-par, exchange-traded preferred securities issued primarily by financial institutions,” says Jason Bloom, head of fixed income ETF product strategy at Invesco. “The fund limits exposure to the riskiest segment by excluding securities rated lower than B-, based on the average of ratings from S&P, Moody’s and Fitch.”
After subtracting a 0.5% expense ratio, investors currently receive a 6.3% 30-day SEC yield with PGX. One factor to consider is PGX’s relatively high interest rate sensitivity, with a duration of about 10.2 years. That means rising interest rates can pressure prices, while falling rates may provide a tailwind. PGX is also larger than PFFD, with about $3.8 billion in assets under management.
Invesco Variable Rate Preferred ETF (VRP)
“Unlike PGX, VRP also includes corporate hybrid securities and is dominated by $1,000-par, institutional-style issuance (over 85% of holdings), giving it a structurally different profile than the traditional retail-oriented $25-par preferred market,” Bloom explains. Investors looking to minimize interest rate risk may find VRP more appealing than PGX due to its floating-rate nature. The ETF also charges 0.5%.
“While some of VRP’s holdings may temporarily pay fixed coupons, the presence of coupon reset features generally limits long-term rate sensitivity relative to traditional fixed-rate preferred strategies, making the ETF relatively more defensive during periods of rising or volatile rates,” Bloom says. The ETF has a lower average duration of 2.9 years and currently pays a 5.5% 30-day SEC yield.
[READ: 9 ETFs for Solid Alternative Assets]
VanEck Preferred Securities ex Financials ETF (PFXF)
“Most preferred stock ETFs allocate 60% or more of their portfolios to the financial sector, creating meaningful concentration risk for investors,” explains Coulter Regal, product manager at VanEck. “PFXF provides broader exposure to segments like utilities, industrials and real estate.” The ETF currently charges a 0.4% expense ratio and has over $2.1 billion in assets under management.
“Financial sector preferred stock can carry outsized sensitivity to credit spreads and regulatory developments,” Coulter says. “Non-financial preferred securities have also historically offered a yield pick-up over their financial counterparts, giving investors an opportunity to both diversify and enhance income.” PFXF currently pays a 6.5% 30-day SEC yield with monthly distributions.
Virtus InfraCap U.S. Preferred Stock ETF (PFFA)
Not all preferred stock ETFs passively track an index. Some, like PFFA, are actively managed and have delivered stronger results. Over the past five years, PFFA has generated an annualized return of 6%, compared with 1.5% for the S&P U.S. Preferred Stock Index. One reason is its ability to avoid negative yield-to-call securities, which are preferred issues priced above their redemption value.
If those securities are called, investors can receive less than what they paid, resulting in a loss despite collecting dividends. Passive-index-tracking ETFs must hold these securities, while active ETFs like PFFA can avoid them. PFFA can also use leverage, typically in the range of 20% to 30%, to boost income. The ETF currently offers a 9.6% 30-day SEC yield, but that comes with a higher 2.11% expense ratio.
InfraCap REIT Preferred ETF (PFFR)
Real estate investment trusts (REITs) can fund acquisitions by issuing common shares, bonds or preferred stock. To capture the last segment of the capital structure, InfraCap offers PFFR. The ETF passively tracks the Indxx REIT Preferred Stock Index. Unlike PFFA, PFFR is not actively managed and does not employ leverage. After a 0.45% expense ratio, PFFR currently provides a 7.9% 30-day SEC yield.
According to InfraCap, PFFR is the only ETF dedicated specifically to REIT preferred securities. This approach sits between traditional equity REIT investing and mortgage-backed securities, offering a blend of income and stability. Distributions from REIT preferreds are supported by the same underlying rent cash flows, but they sit higher in the payout hierarchy, giving them priority over common shareholders.
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7 Best Preferred Stock ETFs to Buy Now originally appeared on usnews.com
Update 04/08/26: This story was previously published at an earlier date and has been updated with new information.
