Q. Are preferred stocks, with yields over 6%, good investments?
A. The answer is, like any investment options, it depends.
First, let's understand what are preferred stocks?
Preferred stocks are technically stock investments, but with either fixed or floating dividend yields. It doesn't enjoy any benefit from the growth of the company's value, but preferred stocks holders stand ahead of common stockholders, but behind bond holders when a company bankrupts.
Preferred stocks are either perpetual (have no maturity) or are generally long term, typically with a maturity of between 30 and 50 years.
Preferred stocks typically come with callable features, meaning if interest rates fall, the issuer will likely call the referred stocks and replace with new issues with lower yields. If interest rates rise, the price of the preferred stocks will likely fall, of course the issuer wouldn't exercise the call option.
Next blog post will look at why preferred stocks are attractive.
A. The answer is, like any investment options, it depends.
First, let's understand what are preferred stocks?
Preferred stocks are technically stock investments, but with either fixed or floating dividend yields. It doesn't enjoy any benefit from the growth of the company's value, but preferred stocks holders stand ahead of common stockholders, but behind bond holders when a company bankrupts.
Preferred stocks are either perpetual (have no maturity) or are generally long term, typically with a maturity of between 30 and 50 years.
Preferred stocks typically come with callable features, meaning if interest rates fall, the issuer will likely call the referred stocks and replace with new issues with lower yields. If interest rates rise, the price of the preferred stocks will likely fall, of course the issuer wouldn't exercise the call option.
Next blog post will look at why preferred stocks are attractive.
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