slides08b - 8b Preferred stock Preferred stock •...

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Unformatted text preview: 8b. Preferred stock Preferred stock • Preferred stock has precedence over common stock in the payment of dividends and in the distribution of assets in the event of a liquidation. • Preferred shares typically carry no voting rights (but they may get voting rights if no dividend has been paid for some time). 2 Preferred stock — continued • Preferred shares have a stated liquidating value , usually $100 per share, and fixed dividend (like a bond). – However, unlike bonds, directors may decide not to pay the dividend. – Dividends are either cumulative or noncumulative . If dividends are cumulative (the most common form) and are not paid in one quarter, they will be carried forward in arrearage . – Usually, the accumulated dividends must be paid before the common shareholders can be paid anything. – Not paying the dividend on preferred stock is a very bad signal to the market. One step above defaulting on debt payments....
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slides08b - 8b Preferred stock Preferred stock •...

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