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
