Features
Preferred stock is a special class of shares which may have any combination of features not possessed by common stock. The following features are usually associated with preferred stock:
- Preference in dividends
- Preference in assets, in the event of liquidation
- Convertibility to common stock.
- Callability, at the option of the corporation
- Nonvoting
In general, preferreds have preference to dividends payments. A preference does not assure the payment of dividends, but the company must pay the stated dividend rate before paying dividends on common stock.
Preferred stock may be cumulative or noncumulative. A cumulative preferred requires that if a company fails to pay a dividend (or any amount) below the stated rate, it must make up for it at a later time. Dividends accumulate with each passed dividend period (which may be quarterly, semi-annually or annually). When a dividend is not paid in time, it has "passed"; all passed dividends on a cumulative stock make up a dividend in arrears. A stock without this feature is known as a noncumulative, or straight, preferred stock; any dividends passed are lost if not declared.
Read more about this topic: Preferred Stock
Famous quotes containing the word features:
“Art is the child of Nature; yes,
Her darling child, in whom we trace
The features of the mother’s face,
Her aspect and her attitude.”
—Henry Wadsworth Longfellow (1807–1882)
“It is a tribute to the peculiar horror of contemporary life that it makes the worst features of earlier times—the stupefaction of the masses, the obsessed and driven lives of the bourgeoisie—seem attractive by comparison.”
—Christopher Lasch (b. 1932)
“All visible objects, man, are but as pasteboard masks. But in each event—in the living act, the undoubted deed—there, some unknown but still reasoning thing puts forth the mouldings of its features from behind the unreasoning mask. If man will strike, strike through the mask!”
—Herman Melville (1819–1891)