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?

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  1. Security

    A financial instrument that represents an ownership position ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating ...
  3. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a ...
  5. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders ...
  6. Equity Financing

    The act of raising money for company activities by selling common ...

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