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: