Preferred stock is equity. Preferred stock also (usually) has a fixed dividend payout. This is why some investors have referred to preferred stock as "a stock that acts like a bond." Perferreds are carried on the corporate balance sheet in the "Shareholder's Equity" column, not the debt column.

Preferred stock has a fixed dividend rate which makes it a "fixed-income security." There are a couple of exceptions, however. For example, participating preferred stock may receive greater income under certain circumstances. Also, if the corporation is experiencing cash flow difficulties, the board of directors may withhold preferred dividends. So, though preferred stock typically has a fixed dividend, it isn't guaranteed.

To continue reading on perferred stock, see A Primer On Preferred Stocks and What is the difference between preferred stock and common stock?

  1. What are some examples of preferred stock, and why do companies issue it?

    Understand the difference between preferred stock and common stock, and learn the primary reasons why companies issue preferred ... Read Answer >>
  2. How are preferred stock dividends taxed?

    Discover the intriguing debt and equity characteristics of preferred stock, and learn about how preferred stock dividends ... Read Answer >>
  3. What is common stock and preferred stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ... Read Answer >>
  4. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference shares and why investors might value them more than common ... Read Answer >>
  5. What is the difference between preferred stock and common stock?

    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's ... Read Answer >>
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  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  2. Preference Shares

    Company stock with dividends that are paid to shareholders before ...
  3. Prior Preferred Stock

    A type of preferred stock with a higher claim on assets and dividends ...
  4. Preferred Stock ETF

    An exchange-traded fund that either tracks a preferred stock ...
  5. Current Dividend Preference

    A safety feature of preferred shares, whereby holders of such ...
  6. Convertible Adjustable Preferred Stock - CAPS

    A preferred, floating rate issue, whose interest rate is tied ...
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