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An Historically Stable Source of High Income

Destra Capital

August 21, 2020

When searching for consistent yield and income, many investors turn to well known asset classes like dividend producing equities, government bonds and municipal bonds. Investors may be well served by also considering preferreds, when looking for stable, higher yields.

Read more about where preferreds fit inside of the capital structure

Since the early 1900’s, preferred stocks have historically been a stable source of high income for investors in comparison to other traditional asset classes such as municipal bonds, government bonds, and common stocks. Inspecting the chart below, you can see that since 1989, preferred stocks have offered an unusually high yield advantage to the other asset classes.

Source: NBER; FRED, Federal Reserve Bank of St. Louis; Standard & Poor’s; US BEA Survey of Current Business; Morningstar; Flaherty and Crumrine; and GlobalMacro Partners, LLC

Definitions: Recession: Recession Dates measured by NBER; Preferred Stock: Preferred Stock Yields; Municipal Bonds: High Quality Municipal Bond Yields; Government Bonds: 10-YR Treasury Yields; S&P 500: S&P 500 Dividend Yields. All information is historical and for illustrative purposes only. Past performance does not guarantee future results.