What is preferred stock & how does it work?

Preferred stock often has a callable feature that allows the issuing corporation to forcibly cancel the outstanding shares for cash. Corporations that receive dividends on preferred stock can deduct 50% to 65% of the income from their corporate taxes. There are advantages for some investors buying preferred shares.

What are the risks associated with preferred securities?

Preferred securities also have credit and default risks for both issuers and counterparties, liquidity risk, and if callable, call risk. Dividend or interest payments on preferred securities may be variable, suspended or deferred by the issuer at any time, and missed or deferred payments may not be paid at a future date.

What is preference preferred stock?

Preference preferred stock is considered the next tier of stock in terms of prioritization. Though it falls behind prior preferred stock, preference preferred stock often has greater priority compared to other issuances of preferred stock.