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Preferred Stock

Preferred Stock

Preferreds

Preferred stocks are a hybrid security that is partially like a bond and partially like a stock

More About Preferred Stock

  • Preferreds pay a fixed payout like a bond
    • Investors usually purchase for this payout/income (not capital appreciation like stocks)
  • Preferred payments are considered dividends like with a stock - they are not contractual interest payments
    • company's can reduce their preferred dividend payments without recourse (unlinke a bond)
  • Usually less risky that common stock - preferreds are higher up on the capital stack
    • Companies are usually required to make preferred dividend payments before paying common holders
    • Preferred holders come before common holder during a bankruptcy
  • can be considered an orphan asset class:
  • usually pay better yields than common stocks
  • Preferred stocks usually have a par value of $25 per share (but not always)

Warnings and Disclaimers

The information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not designed to meet your personal financial situation - we are not investment advisors nor do we give personalized investment advice. The opinions expressed herein are those of the publisher and are subject to change without notice. It may become outdated an there is no obligation to update any such information.

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