Preferred and Common Stock

Do preferred stockholders have voting rights?

No, preferred stockholders generally have no voting rights nor do they have preemptive rights.

Secondary market

an exchange that provides a place for the buyers and sellers of securities to connect and transact business.

Issued stock

authorized stock that has been sold to investors.

Common stocks can be classified as:

authorized, issued, outstanding, and treasury.

What is straight (noncumulative) preferred stock?

has no special features beyond the stated dividend payment. Missed dividends are not paid to the holder.

Adjustable- rate preferred stock

stocks that are issued with adjustable dividend rates (variable).

The Fourth Market (the ECNs)

the fourth market is a market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers.

Authorized stock

the number of shares the company is permitted to issue, which are authorized by a corporate charter. A decision made by the founders of the business.

Purchasing power risk

the potential that, because of inflation, the fixed income produced will not purchase as much in the future as it does today.

Common stocks are classified by:

the size of the corporation. This measurement is called market capitalization.

What is a beneficial about dividend preference for preferred stockholders?

Dividend preference- when the BOD declares dividends, owners of preferred shares must be paid before any payment to common shareholders.

Over The Counter (OTC)

OTC markets offer trading over the phone, over computer networks, and in trading rooms across the country.

Preferred stocks annual dividend represents:

its fixed rate of return.

Risks of preferred stock?

possible loss of purchasing power, interest rate risk, business difficulties (leading to possible reduction or elimination of the dividend) and even bankruptcy (leading to loss of principal).

Treasury stock

stock a corporation has issued and subsequently reacquired.

Callable preferred stock

Corporations often issue callable preferred stock, in which a company can buy back from investors at a stated price after a specified date. Dividends cease on the call date when corporations call preferred stock.

What is beneficial about priority at dissolution for preferred stockholders?

If a corporation goes bankrupt, preferred stockholders have a priority claim over common stockholders on the assets remaining after creditors have been paid.

Interest rate sensitivity

Like a fixed-income security, when interest rates rise, the value of preferred shares declines.

The Third Market (Nasdaq Intermarket)

a trading market in which exchange-listed securities are traded in the OTC market.

Cumulative preferred stock

accrues payments due to its shareholders in the event dividends are reduced or suspended.

What is preferred stock?

an equity security because it represents a class of ownership in the issuing corporation.

Why would someone include preferred stock in their portfolio?

fixed income from dividends, prior claim ahead of common stock, convertible preferred stock sacrifices income in exchange for potential appreciation.

Participating preferred stock

have fixed dividends and offers its owners a share of corporate profits that remain after all dividends and interest due are paid.

outstanding stock

includes any shares that a company has issued that are in the hands investors.

Convertible preferred stock

is convertible if the owner can exchange the shares for a fixed number of shares of the issuing corporations common stock.

How to find a corporations market cap:

multiply the number of outstanding shares by the current market value of a share.

primary market

- Companies sell new stocks and bonds to the public for the first time, such as with an initial public offering (IPO) - Securities are created