Question

One advantage to owning preferred shares of stock is that: A - They can be converted...

One advantage to owning preferred shares of stock is that:

A - They can be converted into debt

B - The dividend is paid out before any dividend is paid to common shareholders

C - They carry additional voting rights that are greater than common shares

D - The dividend payment to preferred shareholders is tax deductible

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Answer #1

One advantage to owning preferred shares of stock is that, the dividend is paid out before any dividend is paid to common shareholders. It means that the preferred shareholders have priority over a company's income. Investors are usually guaranteed a fixed dividend in perpetuity. When interest rates rise, the value of the preferred stock declines, and vice versa. Also, at the time of liquidation, preferred stockholders have a greater claim to a company's assets and earnings.

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