Tuesday, September 27, 2011

Why might some stockholders be included to buy preferred stock rather than common stock? What are the advantag?

Why might some stockholders be included to buy preferred stock rather than common stock? What are the advantages of investing in preferred stock?|||Preferred Stock is alot like Bonds, they are mainly debt that never matures. The advantage is that sometimes they earn more then bonds and if the company goes bankrupt they will receive funds from the liquidation before common stock holders.|||I am assuming you meant inclined, not included. Preferred stockholders have a higher claim if the company goes bankrupt or liquidates. Common stockholders are the last in line to get paid off. Preferred holders are above them. Also preferred holders get paid dividends, if dividends are paid, before common stockholders And corporations who hold preferred stock can deduct at least part of the dividends paid to it.|||Dividends is the primary reason. Preferred stock generally pays higher dividends than the common stock. A second reason although probably of little real importance is that preferred share holders are ahead of common share holders in claims upon the assets of the company in case of liquidation.

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