PFFA is a portfolio addition: its 10.6% yield, monthly distributions rising since 2021, and active management of preferred-stock call risk make it attractive despite a 10% one-year share-price decline. It beat passive PFF over 3 years (38.14% vs 21.6%). Dividend growth is expected gradual but likely below inflation.

One thing we can do is add PFFA to our portfolio. We are allocating only 6% of our portfolio to this ETF, which means $60,000. And its current yield is 10.64%.

Now, if we look at this ETF, this is the first one in today's video where we've seen a good decline in share prices over the past year. It has dropped by about 10%.

And that's exactly what happened with PFFA. That's exactly what we're seeing in the case of PFFA. Distribution has been steadily increasing since 2021. They are paying distributions every month, and the amount of that distribution is gradually increasing every year.

So, this is quite an achievement for an ETF that offers a yield of around 10.6%. It has become more popular in the last few years and currently has $2.33 billion in assets under management.

Now, the thing we need to mention is that this is an actively managed fund. Why is this so important? In fact, you need to understand something about preferred shares or preferred stock.

There is a big risk in this, and that risk is call risk. Most preferred shares can be redeemed or called by their issuing company. And so, it becomes difficult for passively managed preferred stock ETFs to mitigate this risk.

Therefore, they can maintain control over fixed and floating rate securities through active management. They can actively try to reduce call risk, while also diversifying across sectors to maximize yield to call.

So, if we look at how PFFA has performed compared to its passively managed counterpart PFF, PFF's total return over the last 3 years is 21.6%, while PFFA's total return is 38.14%.

That is, this actively managed strategy performed much better than its passively managed counterpart.

So, while I'm a fan of many passive funds in the right circumstances, preferred stock is an asset where active management makes much more sense. And with this addition to the portfolio, we are taking advantage of exactly that.

Now, we are not expecting much dividend growth in the future, but we will see some gradual growth over time. But, it will probably be lower than the inflation rate. However, the initial dividend yield provides a nice addition to the overall portfolio, putting our initial yield at around 6.4% and our weighted 5-year dividend growth rate above 4.1%.