Preferred Stock

A preferred stock is a fixed-income security that behaves like a hybrid of a stock and bond. While preferred stock have characteristics of both stocks and bonds, they share more similarities with the latter. People who invest in preferred stock may want the best of both worlds meaning they want enough risk to potentially get above average returns, but also want the security of dividend payments. The Basics of Preferred Stock Preferred stock share many similarities with bonds but differ in several ways too. Like bonds, preferred stock are a fixed-income asset meaning you can receive regular income or fixed dividends from your initial investment. There are various types of preferred stock and they all have upsides and downsides for investors. Non-cumulative Preferred Stock A downside of preferred stock is that if they’re what’s called non-cumulative preferred stock-a type of preferred stock that allows companies to miss dividend payments without legal implications. The risk in this type of preferred stock is that investors could lose out on money. Callable Preferred Stock Organizations issuing preferred stock can delay dividend payments and distribute them to investors at