Fidelity Preferred Securities & Income ETF (FPFD): A Strategic Monthly-Dividend Play in a Low-Yield World

In an era where traditional income vehicles like bonds and dividend-paying equities struggle to generate meaningful returns, investors are increasingly turning to niche strategies to combat the relentless headwinds of low yields. The Fidelity Preferred Securities & Income ETF (FPFD) emerges as a compelling solution, leveraging its focus on preferred securities and hybrid instruments to deliver a robust monthly-dividend stream. This article evaluates FPFD’s structure, performance, and risk profile to determine its viability as a cornerstone of income-focused portfolios.

The Case for Preferred Securities in a Low-Yield Environment

Preferred securities occupy a unique niche in the capital structure, offering higher yields than corporate bonds while retaining some equity-like characteristics. FPFD’s mandate to allocate at least 80% of assets to these instruments—ranging from fixed-rate preferred shares to contingent convertible securities—positions it to capitalize on this middle ground [1]. With a forward dividend yield of 5.23% as of August 30, 2025 [2], FPFD significantly outpaces the S&P 500’s 0.8% yield, making it a rare gem for income seekers.

The fund’s active management by Fidelity’s fixed-income team further enhances its appeal. Unlike passive strategies, FPFD’s managers can adjust allocations to sectors or issuers with the most attractive risk-adjusted returns, a critical advantage in a market where credit spreads and yield curves are tightly compressed [4]. This flexibility is particularly valuable in a low-yield environment, where incremental gains are hard-won.

Performance and Yield: A Data-Driven Perspective

FPFD’s year-to-date return of 4.92% as of August 2025 [4] underscores its ability to generate both income and capital appreciation. This outperformance—surpassing its category’s 3.09% return—reflects the fund’s exposure to high-yield preferred securities and its disciplined credit-screening process. The fund’s holdings are typically rated BB or Ba by major agencies, balancing risk with the potential for above-average returns [1].

Dividend consistency is another strength. Over the past 12 months, FPFD has paid $1.08 per share in dividends, translating to a 4.97% yield [3]. While forward estimates project a slight dip to 4.79% [4], the fund’s track record of maintaining stable payouts—even in volatile markets—suggests its yield is resilient. For investors prioritizing monthly income, FPFD’s regular distribution schedule (payable on the 15th of each month) provides predictable cash flow, a rarity in today’s market.

Risk Considerations and Credit Quality

Critics may question FPFD’s exposure to lower-rated securities, but the fund’s credit criteria mitigate this risk. Holdings are generally rated at least BB by S&P or Ba by Moody’s, or deemed comparable by Fidelity’s in-house analysts [1]. This threshold ensures that while the fund takes on more risk than investment-grade bonds, it avoids the volatility of junk bonds.

However, preferred securities are not without their challenges. Their sensitivity to interest rates means FPFD could underperform in a rising-rate environment. Additionally, contingent convertible securities—part of FPFD’s portfolio—carry conversion risk, where the preferred shares may convert to common equity at a discount to market value. Investors must weigh these risks against the fund’s yield advantages.

Conclusion: A Strategic Allocation for Income-Driven Portfolios

FPFD’s combination of high yield, active management, and disciplined credit screening makes it a standout option for investors navigating a low-yield landscape. While not without risks, its performance and dividend consistency justify its inclusion in diversified income portfolios. For those seeking monthly dividends with a balance of income and growth potential, FPFD represents a strategic allocation that aligns with the realities of today’s market.

Source:
[1] Fidelity Preferred Securities & Income ETF (FPFD), [https://finance.yahoo.com/quote/FPFD/]
[2] Fidelity Preferred Securities & Income ETF (FPFD) Dividends, [https://www.digrin.com/stocks/detail/FPFD/]
[3] FPFD Dividend History, Dates & Yield, [https://stockanalysis.com/etf/fpfd/dividend/]
[4] FPFD Fidelity Preferred Securities & Income ETF, [https://www.sumgrowth.com/etf-profile/invest-in-FPFD-etf.html]