I know virtually nothing about the preferred stock universe.. except that I got a $30,000 check (representing a 7.7% ann'l. return) yesterday after the preferred stock I held in a bank hosed by the Feds during the S&L debacle ("here, take on this other, failing bank and we'll back you up --OOOPS, no we won't!") finally definitively won its breach-of-contract case. The common stockholders got bupkis though they did have the opportunity to sell for 10 cents on the dollar a few years back to a speculator.
So in my case preferred stock was, well.. preferable!!
I don't know what the point of the ETF would be since I'd imagine what's important is more the underlying company than just the naked fact of whether the stock is preferred or not.
Also, there are many flavors of "preference" with differing characteristics.. and it depends on the particular case whether the preferred status is advantageous or detrimental to you tax-wise or otherwise.
Preferred stock - Wikipedia, the free encyclopedia
Some argue that a straight preferred stock, being a hybrid between a bond and a stock, bears the disadvantages of each of those types of securities without enjoying the advantages of either. Like a bond, a straight preferred does not participate in any future earnings and dividend growth of the company and any resulting growth of the price of the common. But the bond has greater security than the preferred and has a maturity date at which the principal is to be repaid. Like the common, the preferred has less security protection than the bond. But the potential of increases of market price of the common and its dividends paid from future growth of the company is lacking for the preferred.
Advantages of straight preferreds posited by some advisers include higher yields and tax advantages (currently yield some 2% more than 10-year Treasuries, rank ahead of common stock in the case of bankruptcy, dividends are taxable at a maximum 15% rather than at ordinary income rates, as in the case of bond interest).
PRO ETF: A Call For a Preferred Stock ETF (PEY, FDL) - Seeking Alpha
CON ETF: Preferred Stock ETF? No Thanks. - Seeking Alpha