Preferred Shares
Like bonds, preferred shares compensate owners with scheduled payments which resemble interest. However, preferred "interest" is actually in the form of a dividend. This is a significant accounting difference as preferred dividends, unlike debt interest, are charged after taxes and below net income, therefore reducing net income and ultimately earnings per share. Preferred shares may also contain conversion privileges which allow for their exchange into common stock.
The dividend yield is the total yearly payments divided by the principal value of the preferred share.
The current yield is those same payments divided by the preferred share's market price.
If the preferred share has a maturity (not always) there can also be a yield to maturity and yield to call calculated, the same way as for bonds.
Read more about this topic: Yield (finance)
Famous quotes containing the words preferred and/or shares:
“San Francisco is where gay fantasies come true, and the problem the city presents is whether, after all, we wanted these particular dreams to be fulfilled—or would we have preferred others? Did we know what price these dreams would exact? Did we anticipate the ways in which, vivid and continuous, they would unsuit us for the business of daily life? Or should our notion of daily life itself be transformed?”
—Edmund White (b. 1940)
“When the wind carries a cry which is meaningful to human ears, it is simpler to believe the wind shares with us some part of the emotion of Being than that the mysteries of a hurricane’s rising murmur reduce to no more than the random collision of insensate molecules.”
—Norman Mailer (b. 1923)