Investing Unit 5: Preferred Stock

• Introduction
• Unit 1: Basic Building Blocks of Successful Financial Management
• Unit 2: Investing Basics
• Unit 3: Finding Money to Invest
• Unit 4: Ownership Investments
• Unit 5: Fixed-Income Investing

• Certificates of Deposit
• Series EE and I U.S. Savings Bonds
• Money Market Mutual Funds
• Bonds
• Unit Investment Trusts
• Bond Mutual Funds
• Mortgage-Backed Securities
• Annuities
• Preferred Stock
• Guaranteed Investment Contracts
• Five Tips for Fixed-Income Investors
• Summary
• Action Steps
• About the Author

• Unit 6: Mutual Fund Investing
• Unit 7: Tax-Deferred Investments
• Unit 8: Investing Small Dollar Amounts
• Unit 9: Getting Help: Investing Resources
• Unit 10: Selecting Financial Professionals
• Unit 11: Investment Fraud

• Study Guide
• Action Steps
• Monthly Investment Messages
• Glossary

Although technically a form of stock, preferred stock is often listed as a fixed-income investment because it behaves more like a bond, but has no fixed maturity date. The word "preferred" refers to the fact that shareholders receive preferential treatment. They are paid dividends before common stock shareholders and, in the event of a corporate liquidation, can claim corporate assets after bondholders but before common stock shareholders.

Preferred stock typically pays a fixed dividend rate similar to the coupon rate on a bond. Share prices fluctuate inversely with changes in interest rates. Par value on preferred stock is usually about $25 per share so a round lot (100 shares) would cost $2,500. Dividends paid are a fixed percentage of par value. Preferred stock shares are available through brokerage firms.