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How do interest rates affect preferred stock?

Preferred stock is sensitive to fluctuations in interest rates. Like bonds, when interest rates rise, the price of preferred shares typically falls as their yields increase. But when interest rates fall, preferred shares become worth more.

What is preferred stock?

Preferred stock is a type of stock that has characteristics of both stocks and bonds. Like bonds, preferred shares make cash payouts, often at a higher yield than bonds, while offering higher dividend returns and less risk than common stock.

Are preferred shares a good investment?

Like bonds, preferred shares make cash payouts, often at a higher yield than bonds, while offering higher dividend returns and less risk than common stock. The features of preferred stock provide investors with certain benefits, but also come with caveats that potential buyers need to be aware of.

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