What are preferred stocks?

The preferred shares are shares in a company that pays a fixed dividend. Many things about preferred events are unique, but one of their most important features is that dividends must be paid to holders of preferred shares before they can pay the holders of ordinary shares. This explains the use of the term "preferred" because these shares are evaluated above the ordinary shares in terms of payouts. Bonds pay a fixed dividend, no matter what. Preferred shares will gain a fixed dividend, but this dividend is not a legal obligation, which means that if the company is experiencing financial problems, preferred shareholders do not have to receive dividends. Common shares pay a fluctuating dividend depending on the health of the company. Also, they do not have access to the potential profits that ordinary shareholders do because the dividend is solid. On the contrary, the same is that they are isolated if society drops or experiences a decline in its wealth. Preferred shares are often issued when the company does notIt only starts, increases capital and allows people to get to the beginning of business.

There are a number of different types of preferred shares. Convertible shares allow people to transfer their shares to the ordinary share, often with a fixed rate. This may be useful when the ordinary shares increase the value because the shareholder can trade and make a profit. Cumulative preferred shares allow companies to omit dividend, but require dividend to be repaid in the future, while non -umulative shares allow companies to skip dividends without such sanctions. Participated preferred shares allow the possibility of further dividend if the company works well.

Some preferred shares have a due date where Share must be applied for cash or transferred to ordinary shares. Others are permanent, without maturity and some allow flexibility, with shareholders decided to earn, convert or holdon stocks when they ripen.

There are advantages and disadvantages that should be carefully considered before purchasing such stocks. Financial advisors can often provide access to the best investment option, based on the needs of the investor and the history of the company, which the investor considers purchase of shares.