Financial Elements: What is a Preferred Stock?

What Is a Preferred Stock?

The term "stock" refers to ownership or equity in a firm. Preferred stockholders have a higher claim to dividends or asset distribution than common stockholders. These dividends can be fixed or set in terms of a benchmark interest rate like the London InterBank Offered Rate (LIBOR) and are often quoted as a percentage in the issuing description. The details of each preferred stock depend on the issue. 

 

KEY TAKEAWAY

• Preferred stock has characteristics of both bonds and common stock which enhances its appeal to certain investors.

A Financial Element, similar to a literary element, refers to components of a Financial Narrative. Understanding the financial elements can help us in creating and planning Your Financial Narrative. We will continue to look at various other financial elements each week as a part of the Financial Fridays

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