This income-generating asset offers yield exceeding 6% at a tax-advantaged rate

An opportunity for attractive tax-advantaged yield is out there for investors hunting income – if they're willing to accept some risk. Preferred securities have some characteristics of fixed income and stocks. They trade on exchanges like equities, but they also provide investors a stream of income like a bond. Those payments can come quarterly. Yields on preferreds have been attractive as of late, trading above 6% and largely rising more than rates on corporate bonds and long-term Treasury yields, according to Collin Martin, head of fixed income research and strategy at Schwab Center for Financial Research. He recently said that his team sees value in that area, particularly as the conflict in the Middle East and higher oil prices have created some volatility in long-dated rates. "We've seen a lot of movement in Treasury yields, and we still expect a lot of volatility," he said. "For most bond investors, we're not suggesting they focus too much on long maturity, long duration investments. That said, we're still comfortable with preferreds, even though they are long duration." Rate sensitivity, tax-advantaged income Preferreds have maturity dates that are long or are perpetual. This long maturity makes their prices fluctuate when rates move. That means a sudden spike in rates will push their prices lower. Martin noted that even though preferreds are rate sensitive, the yields are attractive for individuals seeking income. …