1.4 Preferred Stock Flashcards
Which kinds of preferred stock are most likely to pay higher dividends?
Participating preferred stock
&
Callable preferred stock
Annual per- share dividend is calculated by?
Par value x Dividend rate
Then
X by number of shares
Preferred stock acts more like a ___________ security
Debt
Preferred stock is less or more risky than common stock??
Less
Market price fluctuates with issuers profits and losses
Common or preferred?
Common
More risky, but more growth potential
Common or preferred?
Common
Voting rights equal one per share
Common or preferred?
Common
May receive a share in companies profits in the form of dividends
Common or preferred?
Common
Dividends may or may not be paid regularly
Common or preferred?
Common
Participates in the companies growth through appreciation in the stock price
Common or preferred?
Common
Priority during liquidation, WHICH stock holders are last in line
common or preferred?
Common
Market price fluctuates with interest rates and issuers credit worthiness
Common or preferred?
Preferred
Less risky but less growth potential
Common or preferred?
Preferred
Voting rights equal none
Common or preferred?
Preferred
When dividends are paid they are paid as a fixed percentage of par
Common or preferred?
Preferred
Junior to bondholders and other creditors, priority liquidation has these holders above which holders
Common or preferred ?
Common or preferred ?
Preferred
Common
Which stock, common or preferred, have a face value/par value?
Preferred
Usually 100 for the test
Par value represents the the?
Money that they preferred shareholder can claim if the company goes bankrupt
What are the four types of preferred stock?
Callable
Convertible
Cumulative
& Participating
What is callable preferred stock?
Callable preferred stock gives the issuing company the right to call its shares after some set date and at a set price
When would an issuer call callable preferred stock?
If interest rates dropped in the issuer can issue new preferred stock at a lower rate
Callable preferred stock tends to pay ____________ dividends than non-callable preferred stock
Higher
This is because the issuer is compensating for the fact that the stock may be called
What is convertible preferred stock?
Stock that offers shareholders the chance to participate in the growth of a company.
It offers investors the right to convert their preferred shares to common stock at a set conversion ratio
Is convertible preferred stock usually lower or higher on the dividend?
Lower
Because of the option to convert
Conversion ratio=
Face Value / conversion price
Parity price =
Current market price x conversion ratio
What is cumulative preferred stock?
Stock that allows dividends to accumulate when a dividend payment Is not made to a stockholder
Non-cumulative preferred stock does not?
Accrue unpaid dividends
Non-cumulative preferred stock pays typically higher or lower dividends than cumulative preferred stock?
Higher
What is participating preferred stock?
Stock that allows investors to receive extra dividends when the company exceeds some predetermined financial goal/goals
Protective provisions permit?
Preferred shareholders to veto certain actions by the company
They are designed to protect preferred stockholders from the dilution of their investment
Preferred stock rises or falls when interest rates go up?
Falls
Preferred stock rises or falls when interest rates go down?
Rises
Do individual Investors have to pay taxes on dividends received?
Yes
What rate do individual investors pay taxes on dividends received?
The qualified dividends rate
The same as long-term capital gains rate
Dividends or text as?
Ordinary income when individuals have not owned the stock beyond a given holding period.
