PFFA offers growing ~10% yield and superior performance vs PFF; income remains robust despite interest rate sensitivity.

And the first opportunity we're going to be talking about is the Virtus InfraCap US Preferred Stock ETF. I know that's mouthful, but it's stock ticker PFFA.

This is an ETF that has a trailing 12-month yield of very close to 10%. And perhaps what's just as impressive is despite that double-digit starting dividend yield, it's when you look at the dividend history, you can see those payouts have continued to grow over time.

In fact, if we scroll down, you can see almost every single year for the past few years, there's been dividend increases. The hikes have been small, there's no doubt, but the fact that 10% yielders growing dividends at all is definitely a bonus.

So, what is this ETF? Well, PFFA is an actively managed, keep that in mind, actively managed exchange-traded fund that invests in a diversified portfolio of US preferred stocks.

Now, when we talk about the performance of PFFA, really what we need to compare it to is PFF. This is the iShares Preferred and Income Securities ETF. However, there's a major difference.

PFF is passively managed, it's not actively managed. It tracks the ICE Exchange Listed Preferred and Hybrid Securities Index. The fund generally holds preferred stocks and hybrid securities according to the index's rules.

So, we have this passively fund versus the actively managed fund, and the performance is pretty telling. PFFA over the last year has outperformed PFF. If we look at the last 3 years, that outperformance becomes even larger, and if we look at the last 5 years, the outperformance becomes even larger once again.

Now, one of the big mistakes a lot of investors make is when they look at the headline expense ratio for this fund on platforms like Seeking Alpha, they see it listed at 2.11% and immediately write it off, but that would be a big mistake.

This is not the true expense ratio. It's not the true management fee. The true management fee is actually about 0.8. So, why is it listed like this? Well, one of the things that the fund actually does is apply slight leverage to potentially enhance portfolio exposure, and they do this opportunistically.

But, anytime you use leverage, you have to add the cost of leverage to the expense ratio. So, really, this is still the net yield you're getting on a forward-looking basis again, closer to 10%, but this is not the true management fee. The true management fee is closer to 0.8%.

Now, on the Mispriced Podcast, I actually interviewed the fund manager for PFFA just a few days ago and we had a deep dive into STRC and we talked about his reasoning as to why he held it in the fund, as well as a few other funds.

Now, the last thing I do want to point out in regards to PFFA is preferred stocks in general are highly interest rate sensitive. So, if long-term interest rates continue to march higher, PFFA is likely going to have pressure on its share price.

And because rates have indeed gone higher over the last year, the share price has pulled back a little bit, around 3%. But, this isn't like ETF where a declining share price automatically equals lower income.

The income has not only been sustained, but as we saw, it's continued to grow even in a higher interest rate environment, which in my opinion gives it a huge advantage.