Pros of investing in preferred stocks:
- Higher fixed-income payments than bonds or common stock
- Lower investment per share compared to bonds
- Priority over common stocks for dividend payments and liquidation proceeds
- Greater price stability than common stocks
- Greater liquidity than corporate bonds of similar quality
Cons of investing in preferred stocks:
- Callability
- Lack of specific maturity date makes recovery of invested principal uncertain
- Limited appreciation potential
- Interest rate sensitivity
- Lack of voting rights
In our next blog post, we will discuss the relationships between preferred stocks and bonds.