Preferred stocks are more like a fixed investment in a
corporation, rather than an equity interest. They have a started rate of
dividend, which is payable only if the corporation's finances permit.
Owner of preferred shares receive a
fixed dividend (not always guaranteed). They do not have voting rights
at annual meetings or on company matters. If the company is wound up
preferred shareholders have a claim, up to a fixed amount, over assets
after creditors (including holders of bonds) have been paid. This claim
takes precedence over those of common shareholders.
Most traded preferred stocks are
cumulative. When the dividend is not paid it accumulates and must be
paid in full before payment of dividends to holders of common shares. If
a preferred share is non-cumulative, omitted dividend do not have to be
paid. Dividend payments do not guaranteed.
There are other types of preferred
shares:
- Retractable Shares
- Participating Shares
- Variable Rates Shares
- Redeemable Shares
- Convertible Shares
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