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Preferred
Shares Outstanding
Overview
Preferred shares
sit between the creditors and the common
share. If a company issues dividends,
preferred shareholders generally receive a higher
dividend than that of common shareholders. In
the event of  a company disolving, preferred
shareholders have a prior right to claim assets
ahead of common shareholders, but behind creditors.
Preferred shares
are generally more expensive for a company to
issue. Preferred stocks do not strain a company
as a debt issue. Corporate debt has a fixed
maturity date that a company must meet, whereas
preferred shares have no maturity; nor does
a company risk asset seizures if it misses a
preferred dividend payment. The preferred dividends
must be paid from after-tax earnings.
In contrast with
common shares, most preferred shares do not
carry voting privileges as long as dividends
are paid on schedule.
Examples of preferred
shares:
-
straight
preferreds, convertible preferreds (shares
can be converted into common shares),
-
retractable preferreds (hareholder can force
the company to buy back the shares at a certain
price on a certain date),
-
variable
or floating rate preferreds,
-
preferreds
issued with warrants,
-
participating
preferreds,
-
-
Several
features that characterise preferred stocks:
-
Preferred
stocks may be cumulative or non-cumulative;
-
if
cumulative, preferred dividends accumulate
over time in the event that a Board chooses
to skip a preferred dividend payment;
-
if
non-cumulative, preferred shareholders
only receive a dividend when declared
by the Board.
-
Preferreds
can be callable and non-callable;
-
if
callable, the company can redeem the preferred
shares with a certain notice period;
-
if
non-callable, the shares cannot be called
while the company exists as an ongoing
entity.
-
Preferred
shares can be issued with a purchase fund,
whereby a company may retire a certain number
of preferred shares if they are at or below
a prescribed price at a given date.
-
A
sinking fund, where a preferred issue is retired
gradually over a period of years, is less
common.
Evaluation
Criteria for the Quality of Preferred Shares
-
Company's
net income provides adequacy of preferred
dividends (Preferred Dividend Coverage),
-
How many years dividends have been paid without
interruption (Record of Continuous Dividend
Payments),
-
amount of equity behind each preferred share
(Book Value per Preferred Share),
-
Independent Credit Assessment.
Sample results
screen:
(see also common
shares outstanding)
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United States
Canada
