Preferred Dividends Are Part Stock, Part Bond. How They Can Provide Income.

We won’t know for a while if the recent rally in bonds has legs. Yields tumbled Thursday, pushing up prices, after a relatively tame inflation reading, as investors bet that the Federal Reserve will ease up on rate hikes quicker than previously expected.

If rates do stabilize from here, it could provide a nice base of support for preferreds—hybrid securities that are part stock and part bond, and have acted like the worst of both worlds this year. The S&P U.S. Preferred Stock Index is off 19% through Nov. 8, including dividends, underperforming both the


S&P 500


and the broad U.S. bond market.