Series 6: 4.1.2.1. Preferred Dividends

4.1.2.1.  Preferred Dividends

As with common shares, dividend payments for preferred shares often are paid quarterly. This means that four times a year the investor receives 25% of the annual dividend. Unlike with common stocks, however, dividend payments for preferred shares are determined when the stock is issued. Preferred stock dividends are typically higher than common stock dividends.

A fixed-rate preferred stock may set its dividend payment at a fixed-dollar value (e.g., $5), or the dividend may be based on a percentage of the par value of the stock, as stated on the stock certificate (e.g., 5% of $100). A floating-rate, or adjustable-rate, preferred stock will have an adjustable dividend based on a formula tied to another benchmark, such as 3% above the interest rate on 90-day Treasury bills. The rate is reset quarterly, making the prices of adjustable