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# The Preferred Stock Fund That Raised Its Payout Three Times In 2026
- URL: https://www.leadlagreport.com/the-preferred-stock-fund-that-raised-its-payout-three-times-in-2026/
- Published: 2026-10-08T20:00:00.000Z
- Updated: 2026-10-08T20:00:00.000Z
- Description: Three raises, a special, a 9.8% discount, and a bank preferred book yielding 8.4%. The quiet quality play.
- Author: Michael A. Gayed, CFA
- Tags: High Yield Spotlight

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---

*HIGH YIELD SPOTLIGHT*

## The Preferred Stock Fund That Raised Its Payout Three Times In 2026

*Three raises, a special, a 9.8% discount, and a bank preferred book yielding 8.4%. The quiet quality play.*

**MICHAEL A. GAYED, CFA**

---

## Key Highlights

- **Yield**: 8.40% on price, 7.58% annualized on NAV, from the $0.1046 monthly income-only distribution, per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com)
- **Payout growth**: Three raises in 2026, from $0.1005 to $0.1025 to $0.1046 monthly, plus a $0.1345 special in December 2025, per [StockAnalysis](https://stockanalysis.com/stocks/ffc/dividend/?ref=leadlagreport.com)
- **Discount**: NAV $16.57 versus a $14.94 price, a 9.84% discount, per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com) as of 9/30/2026
- **Leverage**: 38.61% effective leverage, per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com), deployed against a 274-position preferred and hybrid portfolio
- **Portfolio**: Preferred stock 48.76% and corporate bonds 46.08% of assets, average coupon 7.32%, average bond price $102.38, financials mandate of at least 25% of assets

*Every week, we'll profile a high yield investment fund that typically offers an annualized distribution of 6-10% or more. With the S&P 500 yielding less than 2%, many investors find it difficult to achieve the portfolio income necessary to meet their needs and goals. This report is designed to help address those concerns.*

## The Fund That Keeps Quietly Raising

In a high yield landscape dominated by cuts, resets, and "managed" distributions that quietly hand you your own money back, **Flaherty & Crumrine Preferred Securities Income Fund (FFC)** did something almost nobody does anymore: it raised its payout three times in a single year. The monthly distribution went from $0.1005 in January to $0.1025 in May to $0.1046 in August, on top of a $0.1345 special in December 2025, per [StockAnalysis](https://stockanalysis.com/stocks/ffc/dividend/?ref=leadlagreport.com). The distribution is classified as income-only per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com), meaning the raises are being funded by what the portfolio earns, not by return of capital arithmetic.

The vehicle is a leveraged preferred stock fund, the income corner of the market that sits between bonds and equities, and it enters a moment where the setup is unusually clean. The 10-year Treasury closed the week at 5.28%, and preferreds with 7% plus coupons and no maturity pressure are finally being paid something close to what they are worth. FFC's 1-year NAV total return was 0.50% per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com), unglamorous, but the share price fell 11.2% over the same stretch per [StockAnalysis](https://stockanalysis.com/stocks/ffc/dividend/?ref=leadlagreport.com), which means the discount to NAV widened from near nothing to 9.84%. You are now buying the same portfolio at a 10% markdown to book. That is the tension worth examining.

My take: FFC is a conservative income holding with a bank-heavy preferred book, real leverage risk if rates keep rising, and a management team that has earned the benefit of the doubt on distribution policy. The 8.4% yield is at the low end of this column's range precisely because the quality is at the high end.

![FFC chart1_price](https://storage.ghost.io/c/b8/9e/b89e006c-adc9-4384-b804-e802e23b544e/content/images/2026/10/FFC_chart1_price-3.png)

## Fund Background

FFC launched January 31, 2003 per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com), making it one of the older preferred funds in the country, managed by Flaherty & Crumrine, a boutique that has done exactly one thing, preferred securities, since 1983\. The fund's mandate requires at least 80% of managed assets in preferred and other income-producing securities, with at least 25% of total assets in the financial sector per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com). In practice the financials exposure runs well above the floor, which is both the engine of the yield and the concentration risk, since the preferred market is dominated by banks and insurers.

The fund employs 38.61% effective leverage on $798.3 million of common assets, taking total investment exposure to roughly $1.30 billion per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com) as of 9/30/2026\. That leverage is standard for the category and is the reason an 8.4% distribution rate on price coexists with a 7.58% rate on NAV. Net investment income of $0.62 per share over the six months ended May 31, 2026 per the fund's [SEC shareholder report](https://www.sec.gov/Archives/edgar/data/1174164/000199937126016648/ffc-ncsrs%5F053126.htm?ref=leadlagreport.com) essentially matched the $0.64 distributed over the same period.

## A Bank Preferred Book With Real Coupons

The portfolio holds 274 positions per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com), split 48.76% preferred stock and 46.08% corporate bonds (largely hybrid preferreds that trade in bond form), with a small convertible sleeve. The average portfolio coupon is 7.32% and the average bond price is $102.38, which tells you the book is filled with instruments issued when issuers actually had to pay for capital, not the 5% perpetuals of the zero-rate era. Top holdings include Provident Financing Trust 7.405%, Liberty Mutual 7.8%, Fifth Third perpetuals, Flagstar, and two MetLife issues at 9.25% and 10.75% per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com) as of May 31.

![FFC chart2_dist](https://storage.ghost.io/c/b8/9e/b89e006c-adc9-4384-b804-e802e23b544e/content/images/2026/10/FFC_chart2_dist-3.png)

Notice what is not in the top ten: no tech, no energy, no exotic structured credit. This is a financials income machine. In the current environment that cuts both ways. Bank capital treatment has made new preferred issuance cleaner and legacy instruments scarcer, supporting prices for what exists. But the whole book re-prices when the long end moves, and with the 10-year at 5.28%, the mark-to-market pressure of the past year, an 11.2% price decline, is the direct fingerprint of duration risk, not credit deterioration.

## Attributing A Down Year To Its Real Cause

FFC's trailing year is a textbook case of separating the fund from the market's treatment of it. The NAV total return was positive 0.50% per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com), meaning the underlying preferred book, coupons arriving on schedule, no defaults of consequence, roughly held its ground. The share price fell 11.2% per [StockAnalysis](https://stockanalysis.com/stocks/ffc/dividend/?ref=leadlagreport.com). Every dollar of loss came from the discount widening, not from the portfolio. That distinction defines the opportunity: a fund whose assets are flat while its price falls is, mechanically, getting cheaper against its own book.

The rate sensitivity is quantifiable. The 10-year rose roughly 104 basis points this year to 5.28%, and the fund's price fell 11.2% while the NAV was flattish, which implies the market repriced the fund at a discount at the same time the bond book absorbed the rate move through its below-market coupons. With preferreds and hybrids, the practical risk is asymmetric: in a falling-rate world the instruments get called or refinance lower, capping upside, while in a rising world the perpetual structure offers no maturity rescue. That asymmetry is the price of the 7% plus coupons the book carries, and it is the reason this fund belongs in the conservative sleeve with eyes open, not in the set-and-forget drawer.

## Three Raises And A Special

The distribution record deserves more attention than it gets. The regular monthly payout has climbed steadily, $0.0977 to $0.1005 to $0.1025 to $0.1046 across the past year per [StockAnalysis](https://stockanalysis.com/stocks/ffc/dividend/?ref=leadlagreport.com), and the December 2025 special of $0.1345 suggests the earnings cushion occasionally overflows. This is what an income-only distribution policy looks like when the portfolio's coupon stream is genuinely rising, and it stands in sharp contrast to the managed-distribution funds I have covered that hold a headline number steady while quietly returning capital to do it.

The honest caveat is coverage. The fund's SEC shareholder report shows net investment income of $0.62 per share against $0.64 of distributions paid over the six months ended May 31, 2026, coverage of essentially 100%: income in, income out, with no return of capital reported for the period. That is a genuinely thin cushion, and the raises have consumed most of the improvement in earnings. The December special is not a promise of more specials. Underwrite this as a 7.5 to 8.5% income stream with high sensitivity to the shape of the long end.

## Advantages

The distribution trajectory is the best evidence of portfolio quality. Three raises and a special in twelve months, funded from income, from a manager that has run preferred books through multiple rate cycles. In a column that spends most of its time on cuts, that record is the asset.

The current entry point is unusually good for this fund. The discount sits at 9.84% per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com), and it widened by roughly 11 percentage points during the year, which is what an 11.2% price decline against a positive NAV total return looks like arithmetically. You are getting specialist management at a generic-fund discount, with the raises as a marker that the underlying engine is fine.

The coupon structure gives real income quality. A 7.32% average coupon with holdings at $102.38 means the book is not priced for perfection. These are mostly cumulative, senior-preferred instruments from banks and insurers with regulatory capital incentives to keep paying, which is a materially better claim on cash flow than equity dividends.

## Disadvantages

Rate risk is the dominant exposure, and it is large. Nearly 39% leverage on perpetual or long-dated instruments in a market where the 10-year sits at 5.28% and rose 104 basis points this year means NAV can fall fast when the long end moves. The past year's price decline is the proof. If the 10-year goes to 6%, this is a 10% NAV drawdown fund with a distribution that suddenly looks less covered.

The financials concentration is structural and unavoidable. At least 25% by mandate, well above that in practice, means a bank capital episode, a regulatory shock, or a spread blowout in financial hybrids hits the whole book at once. Diversification within preferreds is mostly an illusion when every issuer is a bank or insurer.

The earnings cushion is thinner than the raise sequence implies. $0.6240 of average earnings per share against $1.26 of distributions leaves little room for a credit event or a further rise in funding costs, and the special payments are discretionary, not contractual income.

## How It Fits In An Income Portfolio

Preferred securities occupy a specific rung in the income stack: senior to common equity, junior to bonds, with coupons that behave like fixed income and call features that behave like nothing else. FFC is the disciplined way to own that rung, and the question for allocation is what job it is being hired to do. It is not a Treasury substitute, the 8.4% comes from bank and insurance capital structures with real, if remote, credit risk. It is not an equity substitute either, the NAV total return was 0.50% over the trailing year per [CEFConnect](https://www.cefconnect.com/fund/FFC?ref=leadlagreport.com), and nobody buys preferreds for growth. The job is income production with a modest discount kicker, and on that job description the current setup qualifies.

The rate scenarios deserve one honest paragraph. If the 10-year falls back toward the mid-4s, the NAV recovers, the discount likely compresses toward its tighter historical range, and the total return is a low-double-digit year from an instrument most investors treat as boring. If the 10-year holds at 5.28% or rises further, the coupon stream keeps arriving, the raises likely pause, and the position treads water while paying you to wait. The asymmetry is why this is the conservative end of this month's six picks: the income is contractual and cumulative, the issuers are regulated institutions with capital incentives to keep paying, and the entry discount is a real margin of safety on a book of instruments averaging $102.38.

Sized sensibly, FFC is the income anchor that lets the portfolio tolerate the higher-octane positions in this column, the deep-discount BDCs, the EM sovereigns, the duration bets. Every income allocation needs one boring engine. This one happens to be on sale.

The total return arithmetic for the conservative case is worth spelling out. Collect the $1.26 annualized distribution, roughly 8.4% of today's price, and assume nothing else goes right: no discount compression, no further raises, NAV flat. That is the floor case, and it beats most fixed income alternatives at equivalent risk. Now add the two live kickers: the discount has roughly 11 percentage points of room to normalize, worth about 12% of upside on its own, and the distribution has been rising three times a year. This is the rare fund where the base case is a mid-single-digit real return with the kickers stacked on top, paid for with a risk you can name in five words: the long end keeps rising.

## Conclusion

FFC is the conservative end of the High Yield Spotlight: a specialist preferred fund with a genuinely improving income stream, trading at a discount that its own quality does not justify, with one very large risk attached. If you believe the long end is near its ceiling, this is one of the better risk-adjusted ways to collect 8% plus from bank capital while being paid to wait. If the 10-year keeps climbing, no distribution raise will cushion the NAV. Short-term, the widened discount and the raises favor accumulation. Long-term, this is a rates view wrapped in a preferreds wrapper, and it should be sized as one.

The Lead-Lag Report is provided by Lead-Lag Publishing, LLC. All opinions and views mentioned in this report constitute our judgments as of the date of writing and are subject to change at any time. Information within this material is not intended to be used as a primary basis for investment decisions and should also not be construed as advice meeting the particular investment needs of any individual investor. Trading signals produced by the Lead-Lag Report are independent of other services provided by Lead-Lag Publishing, LLC or its affiliates, and positioning of accounts under their management may differ. Please remember that investing involves risk, including loss of principal, and past performance may not be indicative of future results. Lead-Lag Publishing, LLC, its members, officers, directors and employees expressly disclaim all liability in respect to actions taken based on any or all of the information on this writing.