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 ?
A preliminary simplified prospectus relating to the Altamira Preferred Equity Fund has been filed with the Canadian securities authorities.
The borrower required additional funding and was looking to layer in preferred equity with accretive terms within the structure of this particular transaction," said Patrick J.
CSV Capital intends to continue purchasing discounted mezzanine loans, B-Notes, participation interests, mortgage and mezzanine whole loans and preferred equity interests in performing assets secured by real estate located in major markets across the country.
As Realty Income continues to finance the expansion of its property portfolio through the issuance of unsecured debt and preferred equity, Fitch will continue to monitor the leverage and fixed charge coverage.
GE Real Estate announced the appointment of Daniel Brook to joint venture preferred equity leader in the North America Equity division.
a real estate investment trust focused on the business of investing in real estate related bridge and mezzanine loans, preferred and direct equity investments, mortgage-related securities and other real estate related assets, today announced that it closed on a $210 million preferred equity investment as part of the purchase of Extended Stay Hotels, Inc.
AIM:XGT), the Florida based communications technology business, announces that it has received and accepted agreements to subscribe for $120m worth of convertible preferred equity securities ("Convertible Preferred Equity").
Subsequently, Arbor determined to limit its investment in the transaction to the preferred equity portion, and to the portion of the assets owned through Extended Stay Hotels.
The CDO is also permitted to invest in corporate debt of real estate operators and retailers, commercial real estate collateralized debt obligation (CDO) securities, commercial mortgage-backed securities (CMBS), and preferred equity.
HRC focuses on distressed debt and preferred equity as well as complex bridge and mezzanine loan situations.
15 /PRNewswire-FirstCall/ -- Calpine Corporation today announced that its wholly owned indirect subsidiary, CCFC Preferred Holdings LLC (CCFC LLC), has completed a $150 million private placement of preferred equity.

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