可转换优先股和不可转换优先股的区别（可转换与不可转换优先股的异同）

jk • 2023-08-24 12:22:38

摘要可转换与不可转换优先股的异同 What are preferred stocks? Preferred stocks refer to stocks that are granted special privileges and rights such as having...

可转换与不可转换优先股的异同

What are preferred stocks?
Preferred stocks refer to stocks that are granted special privileges and rights such as having a fixed dividend and a higher priority when it comes to receiving dividends and liquidation proceeds. Compared to common stocks, preferred stocks are less volatile and are therefore less risky to invest in. Due to their unique features, they come in various types such as convertible preferred stocks, non-convertible preferred stocks, cumulative preferred stocks and many more.

What are convertible preferred stocks?

Convertible preferred stocks, as the name suggests, are preferred stocks that can be converted into a specific number of common stock shares within a predetermined period. These types of preferred shares provide the benefit of being able to participate in the appreciation of the company's value while also providing the security of a fixed dividend. The conversion of these preferred stocks into common stocks usually happens at the discretion of the shareholder.

The advantages of convertible preferred stocks

Investing in convertible preferred stocks offers advantages to shareholders. One advantage is that investors may benefit from stock appreciation if the stock's value increases. The fixed dividend of the preferred stocks is also a benefit for investors, as they receive a predictable stream of income. Another advantage is that owning a convertible preferred stock gives investors voting rights compared to non-convertible preferred stocks, which typically do not offer this privilege.

What are non-convertible preferred stocks?

Non-convertible preferred stocks are preferred stocks that cannot be converted to common stocks. As a result, investors only receive the fixed dividend throughout the life of the share. These types of preferred stocks offer investors a higher yield than convertible preferred stocks. They are preferred by investors who are looking to receive a steady income stream without the risk of loss of principal.

The advantages of non-convertible preferred stocks

Non-convertible preferred stocks offer investors predictable income streams and a higher yield compared to convertible preferred stocks as they have less investment risks. These types of preferred stocks also rank higher in terms of priority when it comes to dividend payments and liquidation proceeds, offering investors more security.

Conclusion

The difference between convertible and non-convertible preferred stocks boils down to the shareholder's objective when investing. Convertible preferred stocks offer investors the potential to benefit from the appreciation of the common stock while also providing a steady income stream. Non-convertible preferred stocks, on the other hand, offer investors fixed income payments and a higher yield, making them a more secure investment. Understanding the differences between these two types of preferred stocks can help investors to make more informed investment decisions based on their risk tolerance profile and investment objectives.