preferred stock

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Preferred stock

A security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a dollar amount or as a percentage of par value. This stock does not usually carry voting rights. Preferred stock has characteristics of both common stock and debt.

Preferred Stock

Stock in a publicly-traded company without voting rights, but otherwise with more rights than common shares. Preferred stocks receive dividends before common shares and sometimes have guaranteed dividends, while common shares only receive the leftovers. Preferred stocks also have a prior claim on capital in the event of liquidation; if the company is liquidated, all preferred shareholders must be paid off before a single common shareholder. Some preferred stocks are convertible, which means they can be changed into common shares at a certain ratio so that even preferred shareholders without voting rights have the possibility of gaining them. Preferred stocks tend not to appreciate as fast as common stocks.

preferred stock

A security that shows ownership in a corporation and that gives the holder a claim prior to the claim of common stockholders on earnings and also generally on assets in the event of liquidation. Most preferred stock issues pay a fixed dividend set at the time of issuance, stated in a dollar amount or as a percentage of par value. Because no maturity date is stipulated, these securities are priced on dividend yield and trade much like long-term corporate bonds. As a general rule, preferred stock has limited appeal for individual investors. See also auction-rate preferred stock, callable preferred stock, cumulative, floating-rate preferred stock, Monthly Income Preferred Securities, new money preferred, participating, preferred dividend coverage, prior preferred, remarketed preferred stock, second preferred.

Preferred stock.

Some corporations issue preferred as well as common stock.

Preferred stock can be an attractive investment because it typically pays a fixed dividend on a regular schedule. The share prices also tend to be less volatile than the prices of common stock.

In fact, preferred stock prices tend to move with changing interest rates in the same way that bond prices do. That's one reason this type of stock is sometimes described as a hybrid investment because it shares some characteristics with common stock and some with fixed-income securities.

What preferred stock doesn't generally offer is the right to vote on corporate matters or the opportunity to share in the corporation's potential for increased profits in the form of increased share prices and dividend payments.

Convertible preferred shares can be exchanged for a specific number of common shares of the issuing company at an agreed-upon price. The process is similar to the way that a convertible bond can be exchanged for common stock.

preferred stock

see PREFERENCE SHARE.

preferred stock

see PREFERENCE SHARE.
References in periodicals archive ?
One cautionary note: there are all kinds of exotic new preferred shares.
The yield investors get on preferred stocks depends on current interest rates, the credit rating of the issuing company and investor interest in the offering, experts say.
The nature of an obligation to repurchase or redeem stock is the issue raised by mandatorily redeemable preferred stock and put options written on an enterprise's own stock.
A company that issues mandatorily redeemable preferred stock simultaneously incurs a contractual obligation to redeem the stock for a specified or determinable amount on a specified or determinable date.
Whether mandatorily redeemable preferred stock qualifies as a liability turns mainly on the issuer's ability to avoid the future payment of cash to redeem the stock.
Because the legal restrictions on distributing assets to owners permit an issuer of mandatorily redeemable preferred stock to avoid satisfying its obligation if it encounters severe financial difficulties, some contend that the stock does not qualify as a liability.
For example, even if an issuer has coupled a preferred stock offering with a redemption date, many courts have held that the instrument was equity.
A preferred shareholder's right to a dividend is conditioned on corporate earnings and the discretionary declaration of dividends by the board of directors.
As a practical matter, preferred stock issues are rarely recorded as loans.
One of the perceived abuses was the purchased of adjustable rate preferred stock (55) which both limited the risk of the loss of principal and sheltered income.
In addition to the availability of the section 243 DRD, amounts paid on preferred are taxable under section 301 if they (a) are quantifiable and subject to the holder's demand (69) and (b) are eligible for the stock for a minimum investor has held the stock for a minimum of 46 days.
Section 305(b)(4) makes a distribution taxable if it is made with respect to preferred stock; where the redemption price of the preferred has increased, the increase is taxable as an additional distribution of preferred on the existing preferred.