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Preferred Stock – Risk Investment with Good Return

By Chris Adam Subscribe to RSS | June 6th 2012 | Views:
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What is the benefit of preferred stock offerings?

It allows a company the necessary alternative option to borrow money from banks and other similar institutes. In most of the cases, chances are higher that company will cut dividends and also go for arrears without facing much risk or paying for heavy penalty associated with credit ratings. This may well be the reason that several companies try to avail for this particular route while issuing the corporate debts.

However, there is a strange saying about preferred stocks. They are mostly considered to be hybrid investment. The reason is very obvious. These stocks feature the quality of both stock and bond. For common stocks, these are often considered to be higher ranking debts. However, they are much lower ranked to present day corporate bonds. During liquidation happening, it is the shareholders who will be paid first. After that, bond holders will be considered for payment. Those who are searching for higher yield to call, local banks are there to provide with the right solution. Stock market never falters for a permanent basis. It keeps on rising up and falling down. Expert players will know the correct time to invest and then withdraw. Proper knowledge as well market exposure is necessary.

These days, most of the preferred shares have undergone suitable negotiation to provide with a certain dividend amount (fixed). The question is: how is the dividend specified? It is specified mainly as a certain percentage of the fixed amount or par value. There are times when dividends on any preferred stock can well be negotiated as purely floating. This may change accordingly, depending on base interest (pre-determined) rates like LIBOR. Several such stocks as well issuers are available in the market these days. Those who are ready to take a little bit of risk, they can look for mutual funds as well ETFs for investment.

Chris Adam - About Author:
For more information on preferred stock, check out the info available online at http://www.epreferreds.com

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