A Matter of Preference
Preferred stocks are often some of the most unloved securities on the market, usually for good reason. While preferred securities are primarily attractive to investors because of their high yields and special tax status, these advantages are tempered by the fact that preferreds rank junior to bonds and they can have their dividends suspended at the will of company management. Unlike common stock, shareholders of preferred securities also do not have the chance to participate in the appreciation of a company's equity (unless preferreds are convertible to shares of common stock). Preferreds can also be called back early at par value, exposing investors to reinvestment risks and, should the issue be traded over par, potentially a...
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