Preferred shares are like a unique class of shares. They get first preference when it comes to dividend and liquidation. With liquidation, if things go south for the company and they have to sell off stuff, you'll be first in line to get paid.
Additionally, some preferred shares have cumulative dividend rights, meaning any unpaid dividends from one period carry forward and must be paid before common shareholders receive dividends.
At the end of the day, it's not all rainbows and unicorns. There are a few cons too. It might not give you the same wild ride as regular stocks in the long run, and preferred shareholders typically do not have voting rights. That means that they cannot participate in the company's decision-making process, sorry!
But, if you're all about that extra income and you want something a bit more stable than regular stocks, preferred stock could be your new BFF.
As you explore your investment options, understanding the characteristics of preferred shares can help you make informed decisions. Choose what aligns best with your financial goals and risk appetite.
Happy investing!
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