Preferred Stock

By: Martin M. Shenkman, CPA, MBA, JD

Stock that has a preference over common stock for the payment of dividends and generally has only limited, if any, participation in the future economic growth of the corporation. Preferred stockholders also receive preference over common stockholders if the corporation is liquidated. Many preferred stocks are subject to call features that permit the corporation to redeem them under specified conditions. Some preferred stocks have a cumulative dividend. If a dividend is missed, it accumulates and must be paid in the future. A preferred stock differs from a bond in that it does not have a fixed maturity date.

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