Unlocking Yield in a Low-Yield World: Evaluating the Purpose US Preferred Share Fund (RPU.U)

In an era where traditional fixed-income assets struggle to generate meaningful returns, income-focused investors are increasingly turning to alternative yield sources. The Purpose US Preferred Share Fund (RPU.U) has emerged as a compelling option for those seeking exposure to dividend-generating preferred shares in the U.S. market. With its recent declaration of a CAD 0.094 per unit distribution for September 2025Purpose Investments Inc. Announces September 2025 Distributions^[1], the fund underscores its role as a strategic tool for navigating today's low-yield environment. This analysis evaluates RPU.U's yield potential, risk profile, and positioning in a landscape where cash alternatives are scarce.

Yield Potential: A Competitive Edge in a Dwindling Market

RPU.U's September 2025 distribution of CAD 0.094 per unitPurpose US Preferred Share Fund - Series A Non-Currency Hedged^[2], coupled with its current price of $19.72 as of July 21, 2025Purpose U.S. Preferred Share Fund ETF (RPU) - Investing.com^[3], implies an approximate annualized dividend yield of 5.67% (calculated as (0.094 / 19.72) * 12). This figure significantly outpaces the yields of conventional 10-year U.S. Treasury bonds, which hover near 3.8% as of mid-2025U.S. Treasury Yield Data (2025)^[4]. The fund's focus on U.S. investment-grade preferred securities—backed by strong fundamentals and active management by Neuberger BermanPurpose US Preferred Share Fund | Fixed Income | RPU^[5]—positions it to sustain such payouts, even as central banks maintain restrictive monetary policies.

However, historical performance reveals a caveat. While RPU.U delivered a 0.36% total return (including dividends) over the past yearPurpose U.S. Preferred Share Fund (NEO:RPU) Stock Price^[6], its long-term average annual return since inception (December 2016) is a concerning -5.38%. This duality highlights the fund's dual nature: a high current yield paired with capital preservation risks. Investors must weigh the immediate income against the potential for principal erosion, particularly in rising interest rate environments where preferred shares can underperform.

Risk-Adjusted Returns: Balancing Volatility and Reward

RPU.U's risk profile appears more favorable than its benchmark. The fund's standard deviation of 8.6%Purpose US Preferred Shr ETF (Non-FX H) RPU.B - Morningstar^[8]—compared to its benchmark's 12%—suggests smoother returns, a critical attribute for income-focused portfolios. This lower volatility is partly attributable to its concentrated holdings in investment-grade securities (BBB- or higher by S&P/Fitch or Baa3 or higher by Moody's)Purpose US Preferred Share Fund | Fixed Income | RPU^[9], which mitigate credit risk.

Yet, the absence of a Sharpe ratio in available dataSharpe Ratio for RPU.U (Unspecified)^[10] complicates a full risk-adjusted assessment. While the fund's lower volatility is a positive, its negative long-term returns imply that investors may not be adequately compensated for the risks taken. This tension between yield generation and capital appreciation underscores the need for disciplined portfolio integration, such as using RPU.U as a satellite holding rather than a core asset.

Strategic Positioning: A Niche Player in a Low-Yield World

RPU.U's appeal lies in its ability to fill a gap left by traditional income vehicles. U.S. preferred shares, which typically offer higher yields than corporate bonds while retaining some equity-like upside, are particularly attractive in a low-yield environmentU.S. Preferred Shares: A Yield Alternative^[11]. The fund's non-currency-hedged structure (RPU.U) also exposes investors to USD-denominated returns, which could benefit from a stronger U.S. dollar—a factor worth considering in a global portfolio.

However, strategic positioning requires caution. The fund's -5.38% average annual return since inceptionPurpose U.S. Preferred Share Fund (NEO:RPU) Stock Price^[12] signals structural challenges, possibly linked to its active management strategy or sector concentration (e.g., financials). Investors should pair RPU.U with assets that offset its capital depreciation risks, such as inflation-linked bonds or equities with strong cash flow generation.

Conclusion: A Yield Play with Caveats

The Purpose US Preferred Share Fund (RPU.U) offers a compelling yield proposition in a world starved of income-generating assets. Its recent CAD 0.094 distributionPurpose Investments Inc. Announces September 2025 Distributions^[13] and active management strategyPurpose US Preferred Share Fund | Fixed Income | RPU^[14] make it a standout option for investors prioritizing monthly cash flow. However, its historical underperformance and lack of a clear Sharpe ratioSharpe Ratio for RPU.U (Unspecified)^[15] necessitate a measured approach. RPU.U is best suited for investors who can tolerate moderate volatility and prioritize current income over long-term capital growth—a profile well-aligned with retirees or those seeking to supplement core fixed-income holdings.