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Preferred Stock Dividends

Because preferred stock sits above common stock in a company's capital structure, preferred stock dividends have preference over common stock dividends. However, preferred stock dividends do not have preference over any securities that are senior in the capital structure — such as unsecured debt and other types of borrowings.

Understanding a company's full capital structure is important when considering the potential reliability of preferred stock dividends paid by that particular company. Some important questions to ask include:

  • How much common stock "cushion" lies underneath the preferred?
  • Are dividends currently paid to the common stock, and have those dividends been stable?
  • How much debt sits above the preferred?
  • Has the preferred been rated by one of the credit rating agencies?
  • Are there other classes of preferreds?

Gaining an understanding of a company's full capital structure and credit profile can help lead preferred stock investors to better decision-making about which preferred stock dividends are most likely to be maintained. As a jumping off point for further research, here are a few pages on Ru Back Packer that present preferred stock dividends:

Other preferred stock dividend resoures:

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