Preferred Share
A Preferred Share is a equity stock that includes properties of both an equity instrument and a debt instrument.
- Context:
- It can be held by a Preferred Share Shareholder.
- It can (typically) be considered a Hybrid Financial Instrument.
- …
- Counter-Example(s):
- a Common Stock.
- See: Stock Dividend, Bond (Finance), Liquidation.
References
2014
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/Preferred_stock Retrieved:2014-6-1.
- Preferred stock (also called preferred shares, preference shares or simply preferreds) is a type of stock which may have any combination of features not possessed by common stock including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument. Preferreds are senior (i.e., higher ranking) to common stock, but subordinate to bonds in terms of claim (or rights to their share of the assets of the company) [1] and may have priority over common stock (ordinary shares) in the payment of dividends and upon liquidation. Terms of the preferred stock are described in the articles of association.
Similar to bonds, preferred stocks are rated by the major credit-rating companies. The rating for preferreds is generally lower than for bonds because preferred dividends do not carry the same guarantees as interest payments from bonds and because preferred-stock holders' claims are junior to those of all creditors.
- Preferred stock (also called preferred shares, preference shares or simply preferreds) is a type of stock which may have any combination of features not possessed by common stock including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument. Preferreds are senior (i.e., higher ranking) to common stock, but subordinate to bonds in terms of claim (or rights to their share of the assets of the company) [1] and may have priority over common stock (ordinary shares) in the payment of dividends and upon liquidation. Terms of the preferred stock are described in the articles of association.
- ↑ Drinkard, T., A Primer On Preferred Stocks,
- http://www.investopedia.com/terms/p/preferredstock.asp
- A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights. The precise details as to the structure of preferred stock is specific to each corporation. However, the best way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation). Also known as "preferred shares".
There are certainly pros and cons when looking at preferred shares. Preferred shareholders have priority over common stockholders on earnings and assets in the event of liquidation and they have a fixed dividend (paid before common stockholders), but investors must weigh these positives against the negatives, including giving up their voting rights and less potential for appreciation.
- A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights. The precise details as to the structure of preferred stock is specific to each corporation. However, the best way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation). Also known as "preferred shares".