Preferred Stock

Description: Preferred stocks are equity securities that represent ownership in a corporation and are issued with a stated dividend. In recent years, a growing number of preferred stocks have issued as fixed-rate capital securities.

Straight preferred stock has characteristics of both stocks and bonds. Like common stock, straight preferred stock represents ownership in a company. This ownership entitles you to a share of the company’s profits, a portion of which is paid in the form of cash dividends. Most straight preferred stocks carry a fixed dividend that does not change. Although this dividend is not guaranteed because the stock is preferred, a preferred stockholder is entitled to dividend payments before holders of common stock.

Many straight preferred stocks resemble bonds that pay a fixed amount of income (in the form of a dividend) and they have call features that allow the company to buy back its stock in the future at a predetermined price. Most straight preferred stocks have no maturity date.

Objective: To prove long-term corporate investors with high current income.

Suitability: Corporate investors who can take advantage of the 70 percent dividend exclusion.

Product Features:

1. Preferred stocks provide fixed payments.
   
2. Preferred stocks are typically less volatile than common stocks.
   
3. Preferred stocks tend to provide higher yields than comparable fixed-rate corporate bonds or common stock of the same issuer.