dq unit 6 finance - A company does not have to pay a...

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Hello class and professor, In what respect is a perpetual bond similar to a no-growth common stock? They are both no-growth investments, with coupon or dividend payout being fixed every semiannual or yearly. A perpetual bond is actually very similar to preferred stocks because it has a stated payment rate (dividend rate in the case of preferred). The main difference between a bond and preferred stocks is that the bond will have higher priority in the event of liquidation.
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Unformatted text preview: A company does not have to pay a preferred or common dividend at all however, in order to pay a common dividend the stated preferred dividend must be paid first. I think the benefit to owning preferred stocks over perpetual bonds is that the preferred stocks tend to have higher yields due to the fact that they are behind the bondholders during liquidation, and they may temporarily have their dividends cut....
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