PREFERRED’S

Preferred stock, also called preferred shares, preference shares, or simply preferred’s, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument. Preferred’s are senior (ie., higher ranking) to common stock, but are subordinate to bonds in terms of claim or rights to their share of the assets of the company.

Preferred stock usually carries no voting rights but may carry a dividend and may have priority over common stock in the payment of dividends and upon liquidation. Terms of the preferred stock are stated in a “Certificate of Designation.”

Similar to bonds, preferred stocks are rated by the major credit rating companies. The rating for preferred’s is generally lower since preferred dividends do not carry the same guarantees as interest payments from bonds, and they are junior to all creditors.

*Stocks involve a high degree of risk and are not appropriate for all investors.