Preferred Stock Dividends Will Have to Be Paid off Before the Equity Shareholder is Paid
Before the discussion on preferred stock dividends commences one needs to have a through idea regarding the concept of preferred stock or shares. The definition tells us that it is an equity security that has properties of both equity as well as a debt instrument. preferred stock dividends can be in between the common stock and the bonds. If one possesses the talent to put in money in some place where the growth can be better than the banking rate of interests, then preferred stock is ideal. It is plain and simple that the preferred share holder will have to be paid off before the equity share holder is given his due.
Some of the most common features that are associated with this form of investment are preference in dividends, In case the company is headed for liquidation the preference share holder does enjoy a preference regarding the assts of the company. If there is a need the preference share holder has the option of converting the entire holding into common stock. However, the cause of worry is that a preference share holder has no voting rights. However, in special cases they too have voting rights.
Hence, it does sound a safe investment bet which promises a higher return than the normal rate of interest. Therefore, if anyone is considering putting his/her money it is defiantly not a bad idea. However, just like any other investment opportunity one will have to do a bit of study. If the need be one must seek professional advice in this regard. A company with the bad track record may not offer anything in return. One must have a through idea about the yield to call ratio of a stock before investing money there. Once one indulges in a bit of study it is hardly a concern as preference shares will not betray.
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