iQ Defensive Preferred Income Model

INVESTMENT OBJECTIVE

The iQ Defensive Preferred Income Model seeks to provide a high rate of quarterly income with the potential for capital appreciation.

PROCESS

The Model implements the following rules-based process:

  • Begin with a starting universe of Preferred Stocks and Limited Partnerships from the following defensive industries:

  • Healthcare, utilities, consumer staples, railroads, and aerospace

  • Rank the starting universe by average daily trading volume and keep the top twenty.

  • Apply a multi-factor screen to the remaining twenty preferred stocks and keep the top ten.

The model reconstitutes every November and May.

Why invest in preferred stocks of defensive industries?

Investing in preferred stocks in defensive industries can offer several potential benefits for investors. Preferred stocks are a type of equity security that typically pays fixed dividends and has priority over common stocks in the event of a company's liquidation. Here are some reasons why investors might choose to invest in preferred stocks of defensive industries:

1. Stable Income: Preferred stocks are known for their fixed dividend payments, which can provide stable income for investors. This can be particularly beneficial during times of economic uncertainty, when other sources of income may be less reliable.

2. Defensive Industries: Defensive industries are those that tend to be less affected by economic cycles and can provide stability to a portfolio during a recession. These industries often operate in sectors such as healthcare, utilities, and consumer staples, which provide products and services that consumers need regardless of the state of the economy.

3. Potential for Capital Appreciation: Preferred stocks in defensive industries may also offer potential for capital appreciation, as they can increase in value if the company performs well or if market conditions improve.

4. Lower Volatility: Preferred stocks in defensive industries can be less volatile than other types of equity securities, such as common stocks. This can help reduce portfolio risk and provide a more stable investment environment for investors.