Preferred Stock

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Preferred Stock

Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders.

Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. The earnings of a corporation are applied to this payment before common stockholders receive dividends. If corporate earnings are insufficient for the fixed annual dividend, the preferred stock will absorb the total amount of earnings, and the common stockholders will be precluded from receiving a dividend. When corporate income exceeds the amount that is needed to pay preferred stockholders, the remainder is generally paid to common stockholders. In special situations, the remainder may be distributed pro rata to both classes of stock, in which case the preferred stock is said to "participate" with the common stock.

Preferred stock can be cumulative or noncumulative. If it is cumulative and if the fixed dividend remains unpaid, it becomes a debit upon the surplus earnings of succeeding years. Accumulated dividends must be paid in full before common stockholders can receive dividends. When preferred stock is noncumulative, its preference is extinguished by the failure of the corporation to have sufficient earnings to pay the fixed dividend in a given year.

preferred stock

n. a class of shares of stock in a corporation which gives the holders priority in payment of dividends (and distribution of assets in case of dissolution of the corporation) over owners of "common" stock at a fixed rate. While the assurance of first chance at profits is a psychological and real benefit, preferred stock shareholders do not participate in higher dividends if the corporation makes large profits, and usually cannot vote for directors. (See: corporation, stock, common stock)

References in periodicals archive ?
The following example illustrates the differences in the tax results between treating debt as debt, preferred equity, or common equity when converting a corporation to a disregarded entity.
Third, and perhaps most important, we empirically assess the relation between capital structure and adverse selection across a wide array of entrepreneurial firms with different characteristics for the complete class of forms of finance (debt, convertible debt, preferred equity, convertible preferred equity, common equity, and combinations thereof).
To support the acquisition of 100% of Uniwheels' shares outstanding, the transaction is to be financed with approximately USD 660m of newly funded debt, consisting of a USD 400m senior secured term loan B and USD 260m of senior unsecured notes, as well as USD 150m of preferred equity, consisting of USD 100m of series A convertible redeemable preferred stock and USD 50m of series B preferred stock.
Triton International Limited (NYSE:TRTN) stated on Tuesday that it has raised gross proceeds of USD143.8m from its preferred equity offering of 8.0% Series B cumulative redeemable perpetual preference stock.
M2 EQUITYBITES-June 26, 2019-Triton Completes announces gross proceeds of USD143.8m from its preferred equity offering
The development cost is expected to be USD 78.7 million, with USD 24.5 million of equity and preferred equity invested.
FCP announced a $100 million preferred equity investment with Fairfield Properties to acquire a seven-property multifamily portfolio containing 1,496 units located in Nassau and Suffolk Counties in Long Island, NY.
Securities and Exchange Commission, affirmed Plains All American Pipeline, LP's (PAA) Long-term Issuer Default Rating (IDR) and senior unsecured rating at 'BBB-', its short-term IDR and CP rating at 'F3', and PAA's preferred equity rating at 'BB'.
Rafael Holdings announced that, through a subsidiary, it has partially exercised a warrant to purchase preferred equity in Rafael Pharmaceuticals, a clinical stage, metabolic oncology-therapeutics company which is developing innovative, highly selective and well tolerated anti-cancer agents.
The Ares portfolio company invested $750 million for certain common and preferred equity interests in the venture.
BRG made a convertible preferred equity investment of USD 12.2m to acquire an indirect interest in the joint venture, which acquired Whetstone for a purchase price of USD 35.6m.
is being funded with $300 million in common and preferred equity, including $133 million from Montpelier Re.

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