PTA - PTA: Suffering From Rising Rates, But A Decent Preferred Fund

2025-04-03 18:09:14 ET

Summary

• The Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund offers an 8.14% yield, higher than most fixed-income indices, making it attractive for income-seeking investors.
• Despite recent market turbulence, the fund has maintained its distribution and outperformed the preferred stock index, showcasing its resilience and effective management.
• The fund's cash position appears to have increased, which could be costing it some investment income versus keeping the money invested in preferred stocks.
• The fund's lower leverage compared to peers and strategic asset allocation provide a balanced approach, appealing to risk-averse investors.
• Currently trading at a 4.63% discount on NAV, the fund is reasonably priced but slightly above its historical average, suggesting cautious entry.

The Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund ( PTA ) is a closed-end fund that endeavors to provide its investors with a very high level of current income. This is a need that many investors have today, and it's particularly common among retirees. After all, for most of the past 15 years, it has been exceptionally hard to earn an acceptable level of income without taking on an excessive amount of risk. As we can see here, prior to 2022, the only time in the past 10 years that the yield of the 10-year U.S. Treasury note exceeded 3% was a very brief period of time in late 2018:

A 3% yield from a bond only results in $30,000 per year of income, which is certainly not sufficient to satisfy anyone who has managed to amass a $1 million portfolio over their working years. Today, yields are a little better, but even today’s 4.03% 10-year U.S. Treasury yield only results in $40,300 in annual income. Once again, that's too low to support anyone who has managed to acquire a $1 million portfolio over their lifetime. Other assets that may have been considered good ways for retirees to obtain income in years past, such as utility stocks and bank certificates of deposit, are likewise paying yields that are far too low to support a reasonable lifestyle in retirement. As such, better solutions are needed, and the Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund might be one potential option for anyone in need of income.

As might be expected from the above paragraph, the current yield of the Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund is much higher than many other things in the market. As of the time of writing, shares of this fund yield 8.14%, which is much higher than any of the major fixed-income indices. We can see that in this chart:

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