has anyone on the board ever had a long term investment in a preferred stock? are the dividend payouts treated as dividend income for tax purposes? I'm not asking for specific recommendations because I have already figured in most of the risks (liquidity, volatility, financial stability, and rate risk) on the preferreds I have found. I can post them if anyone wants to see what I have found. I am just asking for your experiences with it and whether or not you had any unexpected problems with volatility or liquidity. Also, do anyone know what happens to preferred stock if a company goes bankrupt? Is it called for a lower than stated price? Its amazing how hard it is to get info on preferreds. If anyone has any resources that would be great. I have only found preferredsonline.com. Basically, I am starting out my investment portfolio and I wanted to build it with solid income preferreds first. Prior to this I started up a high yield MMA with Zion's Bank @ 5.3% APY...so this is the next step in my process. I am trying to find solid dividend yielding and interest bearing investments because of how I get paid at work. It's a pretty nice racket because we get paid pre-tax and we file at the end of the year. So there is no reason why I shouldn't be collecting interest on that money to lessen my tax burden. I am not getting involved with stocks yet because I am looking for as little risk as possible to start. I guess that's kind of odd coming from a professional stock trader lol. I do have my eyes on certain stocks but with investing you have to be patient and I don't want to be worrying about my IRA'S and long term trades as I am trading at work. Further, I do have legal restrictions on what I can trade at work if I trade a stock in a personal account...so just explaining my basis for not wanting to trade these. Well it's a very long shot but if anyone has any info it would be of great help. Thanks!
Preferred stock is in between stocks and bonds on the risk/reward basis. Less risky than a stock. Riskier than a bond. If a company goes bankrupt, bondholders are paid out first, then preferred stock, then common stock. Do you have any licenses? This was discussed during the 7.
yes I have the 7, 55 and 63. but it has been 3 years since I studied for them and I have never used anything I learned for those licenses at work. they are more like hazing I think. so I guess when the company goes bankrupt they payout debt and accrued interest to debt holders then call the preferred stock and pay accrued divs. if there is no money then preferred guys are SOL and stand to lose their entire investment? or get a partial return with whatever money is left? I understand the greater risk with preferreds which is why they generally pay higher divs. What I don't understand is why a lot of them trade (or don't trade in many cases) the way they do. Like why would a preferred stock trade significantly above it's call value when it is paying regular divs? Also, you will see some utility preferred stocks that yield 5% or less that almost never trade and have insanely large spreads. it's like WTF...why even have the thing if it yields so low relative to other preferreds and almost never trades? Those are just a couple off the top of my head. I will remember more as I see them scrolling across my tickers tomorrow. I guess my some of my questions are pretty advanced and I really have no clue who to talk to about them. They probably have simple answers but I don't know where to find them.
