What is the preferential shares?

preferential shares, also known as non -participation of preferred shares, is a type of shares that pay only a specific dividend to the investor. In general, preferred shareholders will not receive any other dividends that are paid to common shareholders. If a provision is added that enable preferred shareholders to share other dividends, the shares are known as the preferential shares.

Participated preferred share dividends are usually a fixed percentage of the nominal value of the shares. For a certain stock, there is sometimes a provision on an adjustable rate. In this case, the payout is usually based on the transfer of benchmarks, such as the US Ministry of Finance. The owners of the ordinary shares have voting rights. Sometimes it is added a provision that enables preferred shareholders to have voting rights for a certain period of time. This usually occurs when dividends are not paid.

Usually the participating dividends of shares only pay off when the company is doing well and gaining profits.If the company fails well, dividends may or may not be owed by the investor. The cumulative participating stocks may accumulate dividends that will be paid to the investor as soon as the performance of the company improves.

Investors who own non -confirmed shares are paid only when the company works well. Dividends that are not accumulated will not be paid later. If the performance of the company improves, dividends will only be paid for the current period.

Whether the preferred shares participates, cumulative or includes voting rights, is usually stated in the shares prospectus. The prospectus is a document provided by an issuer of shares that outlines all the details of a particular preferred investment in shares. Investors can read the prospectus Cje it is before purchasing a preferred stock.

Prospect also indicates whether the stock is preferredconverted. Schemes preferred shares holders have the right to transfer their preferred shares to ordinary shares. In addition, the prospectus will tell the investor whether the company has the right to apply shares. If such a provision is included, the issuer can buy shares from the investor at any time, whether it is an investor to sell.

In the United States, corporations are corporations due to tax treatment of preferred dividends involved in stock dividends by the main buyers of this type of shares. Corporations usually pay less taxes from preferred shares than they pay for bond interest. In general, the opposite applies to an individual investor. As a result, the participating preferred shares are not a very popular choice with small investors.