1.6 Preferred Stock

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Last updated 3:46 AM on 10/10/26
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5 Terms

1
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Straight vs Cumulative Preferred stock

Straight - no requirement for company to make up missed dividends

Cumulative - preferred stock accrues payments

2
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Callable Preferred

company can buy back from investors after a specific date

3
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Adjustable-Rate Preferred

these are tied to other interest rates like T-bills

  • least appropriate choice for investors looking for fixed income


4
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Participating Preferred

offer its owners an additional share of corporate profits after other dividends are paid

  • how much additional is calculated is outlined when the PS is issued


5
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Risks of PS

  • purchasing power risk - due to inflation fixed income won’t be able to purchase in the future what it will td

  • sensitive to increasing interest rates