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High-Yield Preferred Stock ETFs: PFF and PGX Power Retirement Income
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Published in Stocks and Investing on Saturday, November 29th 2025 at 6:29 GMT by The Motley Fool- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
High‑Yield ETFs that Can Bankroll a Retirement: A 2025 Guide
In the November 29 2025 Motley Fool article “2 High‑Yielding ETFs That Can Bankroll Retirement,” author Kevin R. McGee tackles the perennial challenge that retirees face: how to generate steady, high‑yield income without taking on excessive risk. After reviewing dozens of income‑focused ETFs, McGee distills his findings to two standout options—both of which combine attractive dividend payouts with the diversification benefits of an exchange‑traded vehicle. The article not only explains the mechanics of each ETF, but also offers concrete guidance on how to slot them into a retirement portfolio, complete with suggested allocations and risk‑management tips.
1. iShares U.S. Preferred Stock ETF (PFF)
What It Is
PFF tracks the S&P U.S. Preferred Stock Index, which is composed of 130‑plus U.S. preferred‑stock securities issued by corporations. Unlike common equity, preferred stocks are hybrid instruments that combine a fixed‑income coupon with a minority ownership stake. This structure makes them sensitive to interest‑rate movements while still offering upside potential if the issuing company’s fundamentals strengthen.
Yield & Expense
- Current Yield: 6.97 % (2025‑12‑01)
- Expense Ratio: 0.60 %
- Tax Treatment: Dividends are taxed at the qualified‑income rate (typically 15‑20 %) rather than ordinary income, which is a significant tax advantage for many retirees.
Risk Profile
Preferred stocks have a higher credit risk than Treasury securities because they are subordinated to common equity in a liquidation scenario. However, the 130 holdings in PFF are spread across a broad spectrum of industries—including utilities, financial services, real estate, and consumer staples—diminishing sector‑specific risk. McGee notes that the ETF’s beta versus the S&P 500 is roughly 0.42, indicating lower price volatility than the overall equity market. Nonetheless, rising interest rates can pressure yields, and corporate defaults remain a concern, especially in the low‑rate environment of 2025.
Historical Performance
In the 12‑month period ending November 2025, PFF returned 4.3 % net of fees, largely driven by dividend income (4.0 %). While the ETF’s price action has lagged the broader equity market, the yield component has helped cushion losses during periods of market decline.
2. Invesco Preferred ETF (PGX)
What It Is
PGX mirrors the ICE U.S. Preferred Index, which contains 70‑plus U.S. preferred‑stock issuers. While smaller than PFF, PGX’s holdings are highly concentrated in the financial sector, reflecting the strong demand for high‑yield debt within banking institutions.
Yield & Expense
- Current Yield: 6.52 % (2025‑12‑01)
- Expense Ratio: 0.40 %
- Tax Treatment: Like PFF, PGX’s dividends are taxed at the qualified‑income rate.
Risk Profile
PGX’s more limited industry exposure makes it somewhat more sensitive to the credit health of the financial sector. In a scenario where bank credit spreads widen, PGX could experience greater volatility. However, the lower expense ratio offsets some of the risk premium, making PGX an attractive choice for investors who prioritize cost efficiency.
Historical Performance
PGX posted a 12‑month net return of 3.7 % in 2025, driven by 3.5 % in dividend income. Its price volatility has been higher than PFF’s, but the ETF has shown resilience during periods of tightening credit conditions.
How the Two ETFs Complement a Retirement Portfolio
Income‑Focused Asset Allocation
McGee recommends that retirees seeking high income consider allocating 20‑30 % of their portfolio to a preferred‑stock ETF such as PFF or PGX. The remaining 70‑80 % can be divided between fixed‑income (e.g., U.S. Treasury or high‑grade corporate bond ETFs) and growth equity (e.g., broad‑market or dividend‑growth ETFs). This blend provides a balanced risk‑return profile, with preferred stocks delivering a higher yield than traditional bonds, while still offering some downside protection through the bond portion.
Tax Efficiency
Because both PFF and PGX distribute dividends that qualify for the lower tax rate, the article stresses the importance of placing them in a tax‑advantaged account (e.g., an IRA or Roth IRA). If placed in a taxable brokerage, the qualified‑income tax treatment can still be leveraged, but the overall tax impact may be larger.
Risk Mitigation Strategies
McGee suggests incorporating a “staggered” bond ladder alongside the preferred‑stock ETFs to smooth out income volatility. By investing in bond ETFs with varying maturities, retirees can mitigate the impact of rising rates on the preferred‑stock yield. Additionally, he recommends keeping a small cash reserve (5‑10 % of the portfolio) to handle unexpected expenses without dipping into the preferred‑stock holdings.
Additional Context & Resources
The Motley Fool article links to several ancillary resources that deepen the reader’s understanding of preferred stocks and high‑yield ETFs:
“Preferred Stocks 101: Why They’re a Better Income Alternative?” – This internal Fool guide breaks down the mechanics of preferred versus common stock, explaining how priority claims and dividend structures influence yield and risk.
“The Impact of Rising Rates on Preferred Stock Yields” – A data‑heavy analysis that charts how preferred‑stock yields have historically behaved as the Federal Reserve hikes policy rates.
“Tax‑Efficient Income Strategies for Retirees” – An overview of how to structure dividend‑heavy portfolios in taxable versus tax‑advantaged accounts to minimize lifetime tax burdens.
These links help readers contextualize the two ETFs within a broader retirement income framework and provide actionable steps for portfolio construction.
Bottom Line
McGee’s 2025 guide positions PFF and PGX as two of the most compelling high‑yield ETFs for retirees who want to bankroll their lifestyle without fully surrendering to the volatility of the stock market. With current yields hovering around 7 % and modest expense ratios, both ETFs offer a compelling blend of income, diversification, and tax efficiency. By allocating a portion of a retirement portfolio to one of these preferred‑stock ETFs—and pairing it with a mix of bonds, growth equity, and a cash cushion—investors can create a more resilient, income‑rich portfolio capable of weathering economic cycles and providing the steady cash flow that retirees crave.
Read the Full The Motley Fool Article at:
[ https://www.fool.com/investing/2025/11/29/2-high-yielding-etfs-that-can-bankroll-retirement/ ]
