Preferred Stock

With Preferred stock, there are of a variety of features that can be added to in order to either increase its attractiveness to investors, or to make it easier for the issuing company to buy back. Some company uses this to gain access to cash fast and they can control their payback. Preferred stock can have a lot of features add to it but here are the four major categories they will fall into: Callable this feature gives a company the ability to buy back preferred stock on specific dates and at predetermined prices. This feature is useful for those companies anticipating that they can secure lower-interest financing elsewhere in the near future. It is opposed by the buyers of preferred stock, who do not want to sell back their shares and then have to presumably use the funds to obtain lower-interest rate investments elsewhere. Participative Investors may want the ability to participate in whatever additional company earnings are left after their preferred dividends have been paid. This feature can cut deeply into the earnings available to common stockholders, and so is opposed by them. The participative feature is usually only granted by companies that have no other means of raising capital. Cumulative if the company is unable to pay dividends to its preferred shareholders, then these dividends are said to be "in arrears," and the cumulative feature forces the company to pay them the full amount of all unpaid dividends before it can pay dividends to its common shareholders. This is a common feature of preferred stock. Convertible this feature gives investors the option to convert their preferred stock into a pre-determined number of shares of the company's common stock at some point in the future. The conversion feature is initially set at a conversion rate that is not attractive to investors at the point of purchase. However, if the price of the common stock increases, then investors can convert to common stock, and may then sell the stock to realize an