PFFA ETF (NYSEARCA:PFFA) Holds $21.20 as 9.61% Yield Strengthens Its Position as a Top Income ETF

Virtus InfraCap U.S. Preferred Stock ETF (NYSEARCA:PFFA) Trades at $21.20 as 9.61% Yield Draws Strong Income Demand Amid Rate Volatility

The Virtus InfraCap U.S. Preferred Stock ETF (NYSEARCA:PFFA) ended the last session at $21.20, gaining 0.28%, with intraday trading between $21.01 and $21.24. After-hours activity held near $21.23 (+0.14%). The ETF continues to attract income investors as one of the few funds sustaining a 9.61% yield with monthly distributions of $0.17 per share. Its $1.91 billion in assets under management and a $2.04 annual dividend position it as one of the highest-yielding U.S. preferred stock ETFs available in 2025.

PFFA’s Portfolio and Composition Support High Yield Stability

PFFA invests primarily in U.S. preferred equities and hybrid instruments, maintaining nearly 190 holdings diversified across sectors. The fund’s approach focuses on companies with market capitalizations above $100 million, targeting credit-stable issuers while capturing higher yields through active management and moderate leverage.

The portfolio is composed of 71% fixed-rate preferred stocks, 24% baby bonds, 7% trust preferreds, and 6% convertible preferreds. This blend provides both income reliability and partial protection from interest-rate swings. Baby bonds trading below par yield 8.9% to maturity at an average price of $21.67, while those trading above par yield 7.89% to call at $25.32.

The fixed-rate preferred segment, which dominates the structure, offers between 7.5% and 8.4% yield to worst, while the fixed-to-floating and resettable securities, representing around 6% of total exposure, deliver yields near 9.7% and 7.4%, respectively.

Sector Exposure Anchored in Real Assets and Financial Stability

Sector allocation reflects a balance between yield generation and credit quality. Financials represent 35% of the portfolio, followed by real estate (19%), mortgage REITs (18%), industrials (8%), communications (7.6%), and utilities (5.7%). This concentration in real asset-backed and regulated sectors ensures that cash flows are anchored in tangible or contractual revenue streams.

Top holdings include Southern California Edison Trust IV with a 7.45% payout, and Energy Transfer LP (NYSE:ET) preferred units yielding 9.25%. The ETF’s manager, InfraCap Advisors, employs leverage between 21% and 30%, bringing total portfolio exposure to roughly 121% of NAV. This leverage enhances distribution capacity but amplifies volatility during tightening cycles.

Active Management as a Differentiator

Led by Jay Hatfield, InfraCap Advisors employs active selection to identify mispriced preferreds, enhance yield, and manage duration. The team dynamically adjusts exposure to interest-rate risk by rebalancing across fixed, floating, and resettable structures, and occasionally using hedging overlays.

This tactical flexibility has enabled PFFA to outperform passive peers such as the iShares Preferred and Income Securities ETF (PFF) and Invesco Preferred ETF (PGX) over time. PFFA’s five-year total NAV return of 12.46% demonstrates the value of active management in maintaining income resilience even through volatile markets.

Dividend Strength and Coverage Support Long-Term Sustainability

The fund’s 30-day SEC yield stands at 9.31%, nearly equal to its 9.61% distribution yield, showing that dividends are almost fully covered by underlying cash flow. Despite its 2.48% total expense ratio, the 0.8% management fee remains competitive for a leveraged, actively managed preferred fund.

Since early 2023, PFFA’s monthly dividend has held steady at $0.17 per share, with gradual annual increases over the past four years. The fund’s low payout volatility and consistent reinvestment returns make it suitable for income-driven investors seeking reliable monthly cash flow in a high-rate environment.

Credit Profile and Duration Risk Assessment

PFFA carries an average B+ credit rating, positioning it in the higher-yielding segment of the preferred market. Over 60% of its holdings occupy senior positions within their capital structures, limiting downside exposure in adverse markets. Its average duration of 5.9 years keeps rate sensitivity moderate, while floating and resettable preferreds mitigate long-term duration risk.

A 100-basis-point increase in long-term yields would translate into roughly a 4.5% NAV decline, manageable given the 9%+ income stream. The portfolio’s composition — combining seniority, diversification, and real-asset backing — maintains a defensive stance even during widening credit spreads.

Performance Versus Benchmarks and Peers

Over the past 12 months, PFFA has generated a total return of 8.2%, outpacing PFF (6.4%) and PGX (5.8%), while underperforming the S&P 500 (10.5%), consistent with its income-oriented profile. Over five years, it has compounded to a 69.8% cumulative gain since inception, reflecting sustained yield reinvestment and modest price appreciation.

Compared with peers, PFFA offers superior income but slightly higher volatility:
— PFFA: 9.61% yield, 2.48% expense ratio
— PFF: 6.3% yield, 0.46% expense ratio
— PGX: 6.7% yield, 0.51% expense ratio

Despite higher costs, PFFA’s performance advantage lies in its ability to rotate positions, manage leverage, and exploit pricing inefficiencies across preferred instruments

Macroeconomic and Market Context

Preferred securities have regained institutional interest amid easing Treasury yields and stabilizing inflation expectations. The 10-year U.S. Treasury yield, currently near 4.25%, has fallen from 4.9%, creating a favorable environment for income ETFs like PFFA that lock in higher credit spreads.

In a market clouded by fiscal deficits and potential Fed policy shifts, preferred income vehicles with strong coverage ratios and leverage discipline offer reliable performance relative to high-yield corporates or BDCs. PFFA’s exposure to regulated utilities, pipelines, and mortgage REITs provides structural protection against earnings compression during a potential 2026 slowdown.

Outlook for 2026 and Price Target

The ETF trades at 0.96x NAV, modestly below fair value, suggesting a near-term reversion potential as credit markets stabilize. Assuming consistent distributions and moderate price recovery, PFFA’s 12-month price target stands at $22.85, reflecting a 7.8% upside plus income.

With monthly compounding, the effective yield on reinvestment could exceed 10% annually if interest rates stabilize or decline. This makes PFFA particularly attractive for retirees and income investors seeking sustainable double-digit total return potential without equity exposure.

Investment View and Market Positioning

Based on current yield, coverage strength, and portfolio composition, the Virtus InfraCap U.S. Preferred Stock ETF (NYSEARCA:PFFA) remains a strong candidate for investors prioritizing income stability over capital appreciation. Its hybrid portfolio, real-asset exposure, and consistent dividend track record provide durable protection in an uncertain macro environment.

At $21.20, with a steady $0.17 monthly payout, PFFA offers one of the most competitive yields in the preferred market, combining credit diversification, active management, and inflation-resilient sectors. If Treasury yields continue to ease and credit spreads compress, the ETF’s total return outlook for 2026 remains favorable.

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