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The Handbook of Fixed Income Securities, Eighth Edition, 8th Edition by Steven V. Mann, Frank J. Fabozzi

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CHAPTERTWENTY-THREENONCONVERTIBLE PREFERRED STOCK

STEVEN V. MANN, PH.D.

Professor of FinanceMoore School of BusinessUniversity of South Carolina

Preferred stock is a hybrid security that combines features of both common stocks and corporate bonds. While preferred stock possesses some debtlike features, it is considered to be an equity security. Preferred stockholders have a claim on the cash dividends paid by the issuing corporation, and their claim is senior to that of common shareholders. Furthermore, cash dividends paid to preferred stockholders are almost always fixed by contract (e.g., a specified dollar amount or percentage of their face value). Accordingly, “plain vanilla” preferred stock is, in essence, a perpetuity. The specified percentage ...

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