What's the difference between corporate bonds and preferred stocks?

Income-seeking investors can make good use of either: The bonds make regular interest payments, and the preferred stocks pay fixed dividends. But it's important to be aware of the similarities and differences between these two types of securities. Companies offer corporate bonds and preferred stocks to investors as a way to raise money.

Are preferred shares better than bonds?

They can offer more predictable income than do common stocks and are typically rated by the major credit rating agencies. Yet, because preferred shareholders have lower priority in the capital structure as compared to bondholders, the ratings on preferred shares are generally lower than the same issuers’ bonds.

Why are preferred bonds better than traditional bonds?

Preferreds tend to offer higher yields than traditional bonds due to these complex characteristics. Since they rank below traditional bonds, have very long maturities, and don't enjoy the same income payment priority as traditional bonds, investors tend to demand higher yields to compensate for those risks.