31 2009 and 2008 following are several important

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31, 2009 and 2008. Following are several important features of Fortune Brands' convertible preferred stock: Preferred stock is typically reported before common stock- to indicate that these sharehol will receive payments (dividends or payments if the company is liquidated) before co shareholders. Holders of convertible preferred stock are entitled to $2.67 dividends per share; d 2010, the company paid dividends on preferred shares amounting to $429,146, comput 160,729 shares X $2.67, which Fortune Brands rounds off to $0.4 million in the footno Each share of convertible preferred stock is entitled to 3/10 of a vote per share. Holders of convertible preferred stock have a preference in liquidation over common s holders amounting to $30.50; this means that they receive $30.50 per share in liqui before common shareholders receive a payment. Each share of convertible preferred stock is convertible into 6.601 shares of common s Upon conversion, the preferred shareholder tenders preferred shares to the compan . receives 6.601 shares of common in return for each preferred share tendered. Subseque conversion, then, the shareholder loses preferences accorded to preferred shareholders -
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Module 8 I Equity Recognition and Owner Financing 8-6 example, in dividends and liquidation) as well as the $2.67 of dividends per share. Instead, shareholder is now able to participate in the wealth creation of the company with unlim- upside potential both for dividends and share price appreciation. ~ rtune Brands has an option to redeem each share at a price of $30.50; upon redemption, preferred shareholder will receive that cash amount and will surrender that share to the ::ompany. Brands' convertible preferred shares carry a dividend $2.67 per share. This preferred divi- - compares favorably with the $0.76 of dividends per share paid to its common shareholders o (which is a return of] .26% based on year-end stock price of $60.25). Generally, preferred can be an attractive investment for shareholders seeking higher dividend yields, especially tax laws wholly or partially exempt such dividends from taxation. (In comparison, interest nts received by debt holders are not tax exempt.) addition to the sorts of conversion features outlined above, preferred shares sometimes a participation feature that allows preferred shareholders to share ratably with common lders in dividends. The dividend preference over common shares can be a benefit when d payments are meager, but a fixed dividend yield limits upside potential if the company .••.':;';ms exceptionally well. A participation feature can overcome this limitation. Preferred Stock Under IFRS _ er IFRS, preferred stock (called preference shares) is classified according to its underlying char- eristlcs. Preference shares are classified as equity if they are not redeemable, or redeemable at option of the issuer. Preference shares are classified as liabilities if the company must redeem shares (mandatorily redeemable) or if they are redeemable at the option of the shareholder.
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