What are the Different Types of Preferred Stock?

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What are the Different Types of Preferred Stock?

There are primarily six different types of preferred stock. And it’s important to know what makes each unique.

The first type is Cumulative Preferred Stock, and when you own this type, if the company doesn’t pay you a dividend, it has to keep track of all those missed dividends and pay them to you at a later date. Also, the company usually can’t pay a dividend to other shareholders until it pays you all the missed dividends.

The next type is Non-Cumulative Preferred Stock, and when you own this type, if the company doesn’t pay you a dividend, it doesn’t owe you any of those missed dividends.

The third type is Callable Preferred Stock, and when you own callable preferred stock, the company has the right buy back their preferred stock at a pre-determined price.

The next type of preferred stock is Convertible Preferred Stock, and when you own this type, you have the right to change, or convert, your preferred stock into common stock under certain circumstances.

The fifth type is Adjustable Rate Preferred Stock or ARPS, and when you own this type, the dividend is not a fixed amount, but it changes based upon a pre-determined formula.

The final type is Participatory Preferred Stock, and when you own this type of preferred stock, you get your fixed dividend and an additional dividend if certain conditions are met.

Remember, each type of preferred stock is unique, so make sure you know what type you are buying.

 

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