Preferred Stock - Features

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:

    “The features of our face are hardly more than gestures which force of habit made permanent. Nature, like the destruction of Pompeii, like the metamorphosis of a nymph into a tree, has arrested us in an accustomed movement.”
    —Marcel Proust (1871–1922)

    “These, then, will be some of the features of democracy ... it will be, in all likelihood, an agreeable, lawless, particolored commonwealth, dealing with all alike on a footing of equality, whether they be really equal or not.”
    —Plato (c. 427–347 B.C.)

    ““It looks as if
    Some pallid thing had squashed its features flat
    And its eyes shut with overeagerness
    To see what people found so interesting
    In one another, and had gone to sleep
    Of its own stupid lack of understanding,
    Or broken its white neck of mushroom stuff
    Short off, and died against the windowpane.””
    —Robert Frost (1874–1963)