Understanding Preferred Stocks

Understanding Preferred Stocks

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can hopefully help you make informed investing decisions.  Consult a Broker or Lawyer before making any investment. 

One of the better investment vehicles available to investors is the equity class called Preferred Shares or Preferred Stock.  Not much is said about them, so I am going to try and shed some light on the topic and teach a bit about the basics involved in Preferred Stock.
 
Many Preferred Stock shares pay excellent dividends, and some pay above 10%.   Many can be purchased well below their par value which is normally $25 per share.

Preferred Stocks (or Preferred Shares) are simply a class of equity stocks.  They hold a senior position over common shares. One of the big differences (which is of little significance to small investors) is that Preferred Shares do not hold voting rights.

In concept, they are much like a bond, but they are not a debt.  In case of bankruptcy, bonds being debt would be paid first, then Preferred Shares, and if any money was left, the rest would be paid to the common stock shareholders.

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