The main characteristics or features of preferred stock or preference share can be described as follows:
1. Long-term Financing
Preference share or preferred stock is a reliable source of long-term financing which helps to raise adequate capital for the business.
2. Par Value
Issuer of preferred stock sets a fix par value of the stock which helps to determine the amount of interest and dividend.
3. Maturity Period
Generally preferred stock lacks maturity or it is issued without mentioning the maturity date. But nowadays some companies have issued preferred stock with fixed maturity period.
4. Dividend
Preferred stock has fixed rate of dividend. But it can be postponed or cancelled in case of loss.
5. No Voting Right
No right to vote is another important feature of preferred stock. Holders of preference shares do not get voting right and cannot take part in annual general meet like common stockholders.
Also Read:
Also Read:
6. Claim Priority
In case of failure, bankruptcy or liquidation, preferred stockholders have priority over common shareholders to claim on assets and income of the business.
7. Conversion
Preference shares can be converted into a certain number of common shares if preference shareholder wants.
