Preferred Securities: Still Attractive?

Preferred securities have been one of the best-performing fixed income investments over the past six months, aided by lower long-term Treasury yields and the general "risk-on" theme that has propelled many stock indexes to all-time highs.

Our outlook is still positive, but it may be difficult to replicate the strong returns of the past few quarters going forward. We don't necessarily expect prices to fall—they should be range-bound for the near term—but investors should focus more on the high income offered by preferreds rather than the potential for more near-term price appreciation.

We see both benefits and risks with preferred securities today:


  • High income
  • Potential tax benefits
  • Attractive entry point relative to history for long-term investors


  • Low relative yields
  • Price appreciation may be limited over the short run