What is the preferred dividend?

The preferred dividend is a distribution of the holder of its preferred shares. Preferred shareholders are a high priority for the company and therefore receive dividends before joint shareholders. Unlike ordinary stock dividends, which are announced quarterly, the preferred dividends are cumulative, which means that payments occur over time, whether the division is made quarterly or not. Distribution is usually paid quarterly or annually in cash or shares as a remuneration to shareholders from the company's profits.

There are several benefits associated with the preferred shareholder. The preferred dividend is a fixed amount and the return or return is often higher than that of a conventional warehouse that is decided on the basis of profitability. Participated by the shareholders are a specific type of preferred shareholder. The Board of Directors may decide to reward the preferential shareholder with another dividend at the top of a fixed amount when profits are better thanerased.

The preferred shareholders also face some uncertainties. The preferred dividend is not a commitment and the decision to distribute payments is on the company Council. The Council may decide to interrupt the division during the economic crisis or if the profitability is at stake. The company can also restore payments when the Council considers appropriate. Some of the largest societies in the world have paid for a quarter of a quarter of a year.

The preferred dividend can also be postponed by society. This scenario has several advantages, both for the company and its shareholders. This is a way to temporarily keep cash.

Several scenarios could guarantee postponement. For example, the company may face a temporary financial failure, but it is expected that profits will be recovered in the near future. Economic conditions could only be reduced to the extent reasonable to book cash. SocietyThat decide to postpone distribution to preferred shareholders but remains on the hook for cash. They must not restore any dividend payments to common shareholders until preferred dividends are paid.

Although there are certain advantages reserved for preferred shareholders, including routine dividend distribution, there are some disadvantages. Common shareholders receive voting rights with the company on the basis of the number of shares held, which is not extended to preferred shareholders. Convertible preferred shares, another type of preferred shares, can be converted to shipped shares if the investor prefers. In the case of corporate bankruptcy, both types of investors are at risk. The shareholders will receive the preferred dividend payout before all ordinary shareholders are paid, but creditors and bond holders take precedence over both.