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Investopedia explains 'Callable Preferred Stock'
A callable preferred stock issue is advantageous to the issuer, since it confers the flexibility to lower the issuer's cost of capital if interest rates decline or if it can issue preferred stock later at a lower dividend rate. For example, a company that has issued callable preferred stock with a 7% dividend rate is quite likely to call the issue if it can issue new preferreds carrying a 4% dividend rate.
The investor who holds callable preferreds, on the other hand, is at a disadvantage. If the preferred issue is called by the issuer, the investor will most likely be faced with the prospect of reinvesting the proceeds at a lower dividend or interest rate. The call premium that the issuer pledges to pay at redemption of the preferred issue is meant to compensate the investor for part of this reinvestment risk.
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