Preferred Stocks

Video: 

The speaker covers the basics of preferred stock.  He discusses the differences between preferred stock, bonds, and common stock.  He suggests that companies sometimes prefer issuing preferred stock due to the fact it does not show up on the balance sheet as debt.  Secondly, companies can issue preferred stock with a callable feature and retire the preferred stock whenever they want. 

One huge disadvantage of issuing preferred stock is that the dividends from preferred stock is not tax deductible.  Secondly, preferred holders will require a higher rate of return than bond holders because they are second in repayment in event of a default.

He also discusses the invention of money market preferred stocks.


 

February 24, 2009
anonymous (not verified)
anonymous's picture

Preferred Stock...

I was wondering if a preferred stock dividend payment can be in the form of stock, like many US REITs are doing now with their common stock?

Also, can a company purchase its own preferred shares on the open market (at the current market price) or must they call the preferred shares at their initial offering price?

Thanks.