Listen to a Business English Dialogue About Preferred stock
Terry: Hey Ruby, have you ever considered investing in preferred stock?
Ruby: No, I haven’t. What’s special about preferred stock?
Terry: Preferred stock is a type of equity security that typically pays a fixed dividend to shareholders before common stockholders receive any dividends.
Ruby: So, it’s like a mix between stocks and bonds?
Terry: Yes, that’s a good way to think about it. Preferred stockholders have priority over common stockholders when it comes to receiving dividends, but they usually don’t have voting rights.
Ruby: Are there different types of preferred stock?
Terry: Yes, there are several variations, including cumulative preferred stock, which accumulates unpaid dividends if they’re not declared, and convertible preferred stock, which can be converted into a specified number of common shares.
Ruby: How do dividends on preferred stock work?
Terry: Dividends on preferred stock are usually fixed and paid at regular intervals, similar to bond interest payments.
Ruby: Are dividends on preferred stock guaranteed?
Terry: Not necessarily. While preferred dividends are typically paid before common dividends, companies can suspend or reduce preferred dividends if they’re facing financial difficulties.
Ruby: Can preferred stockholders participate in the company’s growth?
Terry: Preferred stockholders generally don’t benefit from the same potential for capital appreciation as common stockholders, but they do have a higher claim on company assets in the event of liquidation.
Ruby: Thanks for explaining, Terry. Preferred stock seems like an interesting investment option.
Terry: You’re welcome, Ruby. It’s important to carefully consider the features and risks of preferred stock before investing, as they can vary significantly from common stock.