🧭 What is a preferred stock (or preferred share)?

A preferred stock — also called a preferred share — is a kind of investment a company issues that sits between its bonds and its common stock. The two names mean the same thing. The key perk: preferred shareholders get paid their dividend before common shareholders, and they stand ahead of common stock (but behind bonds) if the business is ever wound up.

Most preferred shares trade on a stock exchange at around a $25 face value and pay a fixed dividend on a set schedule — usually quarterly, sometimes monthly. People buy them mainly for steady, predictable income rather than growth.

🏛️ Preferred shares vs. common stock vs. bonds

Think of who gets paid first if money is tight. Preferred shares sit right in the middle:

Higher on the ladder = paid sooner and safer. Preferred shares are the steady middle.

🏷️ Par value & liquidation preference

The par (or liquidation preference) is the face value of a preferred share — usually $25, sometimes $50, $100 or $1,000. It's the amount you're owed per share if the issue is redeemed (called) or the company is liquidated. The dividend is set as a percentage of par — the coupon. A 6% preferred on $25 par pays $1.50 a year.

The market price drifts around par. Where it sits — below (a discount) or above (a premium) — is one of the most important numbers for an income investor:

Buy below par and there's upside if it returns to $25; buy above par and you can lose that premium if it's called.

📊 Yield, price & discount to par

Current yield is just the income divided by what you pay for it:

Because the dividend is fixed, a lower price means a higher yield — and vice-versa.

So a preferred trading below par yields more than its coupon and can gain if it's redeemed at par; one above par yields less and risks a loss if it's called away at par.

💵 Dividends: cumulative vs. non-cumulative

If the company ever skips a payment, what happens next depends on one word — cumulative:

A suspended dividend means payments have stopped (on a cumulative preferred, they keep accruing). The ex-dividend date is the cutoff: own the share before the ex-date to receive the next payment.

🔀 Fixed, floating & fixed-to-floating (reset) rates

Most preferreds pay a fixed rate for life. Some are floating-rate — the dividend resets off a benchmark (like SOFR). Many are fixed-to-floating (or fixed-rate reset): a fixed rate for a while, then it switches to a floating/reset rate on a set date.

📞 Call risk, call date & yield-to-call

Most preferreds are callable: the company can buy them back at par, usually starting about five years after they're issued — the call date.

If you pay a premium and the issue is then called, you lose that premium. Yield-to-call (YTC) and yield-to-worst (YTW) show the return assuming it's redeemed — for an above-par, currently-callable issue, YTW (not current yield) is the honest number.

🔄 Convertible & mandatory convertible preferreds

A convertible preferred can be exchanged for the company's common stock, so its price often tracks the common rather than just the dividend. A mandatory convertible must convert into common on a set date — it's really an equity bet paying a high temporary dividend until conversion. (Heads-up: many ordinary preferreds carry a limited change-of-control conversion — a takeover protection — which is not the same as being a true convertible.)

🍼 Baby bonds (exchange-traded debt)

A baby bond is debt in disguise — a bond issued in small $25 pieces that trades on the stock exchange just like a preferred share. It pays interest (not a dividend), has a stated maturity date when the principal is repaid, and ranks ahead of preferred shares. Because it's debt, the interest must be paid or the company is in default — which makes baby bonds generally safer than the same issuer's preferred shares.

🧺 Preferred stock ETFs & funds

A preferred-stock ETF (like PFF, PGX or PSK) holds a basket of hundreds of preferred shares — diversified income without picking individual issues. A fund has no single coupon, par or call date, only a price, a yield and a distribution. Closed-end funds (CEFs) are similar but trade at a premium or discount to their net asset value.

⚠️ The main risks

• Interest-rate risk — preferred prices fall when interest rates rise.
• Call risk — an above-par issue can be redeemed at par, capping your upside.
• Credit risk — a weak issuer can suspend dividends (or, for baby bonds, default).
• Dividend suspension — most likely on non-cumulative bank preferreds during stress.
• Liquidity risk — thinly-traded or OTC/delisted issues can show stale prices.

📖 Glossary — every field on a security page

Current Yield

Annual income ÷ today's price — what you'd actually earn buying now.

Annual Dividend / Interest

Total cash paid per share each year (a preferred pays a "dividend"; a baby bond pays "interest").

Original Coupon

The annual rate set when the issue was sold, as a % of par (6% of $25 = $1.50/yr).

Liquidation Preference (Par)

Face value owed per share — usually $25.

Recent Market Price

The latest trade price from the market feed.

Disc/Prem to Par

How far the price sits below (discount) or above (premium) par.

Capital Appreciation to Par

The potential gain if a discounted preferred's price rises back to par — par minus price, shown in dollars and as a % of today's price. (A premium has none — instead it carries pull-to-par risk.)

Pull to Par

The tendency of a redeemable or maturing security to drift toward its par value as the call or maturity date approaches — a gain for discounts, a loss for premiums.

Pay Frequency

How often it pays — usually quarterly, sometimes monthly or twice a year.

Recent Ex-Date

The last ex-dividend date; own it before this date to get the payment.

Cumulative

Whether skipped dividends are still owed (cumulative) or lost (non-cumulative).

Redeemable / Call Date

Whether — and the first date — the issuer can redeem it at par.

Maturity / Mandatory Conversion

The repayment date (baby bonds) or forced-conversion date (mandatory convertibles).

Convertible / Conversion Price & Ratio

Whether it converts to common stock, and on what terms.

Yield to Call (YTC) / Yield to Worst (YTW)

The return assuming the issue is called; YTW is the conservative number.

Float Formula

The reset/floating-rate terms for fixed-to-floating issues.

Issued / Series

The offering's settlement date and the specific series, taken from the SEC filing.