Preferred Stocks

Description
Preferred stock has characteristics of both stocks and bonds. Like common stock, preferred stock represents ownership in a company. This ownership entitles you to a share of the company's profits, a portion of which is paid in the form of cash dividends. Most preferred stocks carry a fixed dividend that does not change. Although this dividend is not guaranteed because the stock is preferred, a preferred stockholder is entitled to dividend payments before common stockholders. Many preferred stocks resemble bonds in that they pay a fixed amount of income (in the form of dividends) and they have call features that allow the company to buy it back in the future. Most preferred stocks have no maturity date.

Objective
To provide long-term investors with current income.

Suitability
Generally suitable for investors seeking income outside of a Registered Retirement Account.

Features

• Tax Advantages: The dividend income earned on a preferred stock qualifies for the dividend tax credit.
• Safety: Most dividends paid on preferred stocks are cumulative. This means that, should the company miss any dividends, the payments will accumulate and be owed to the investor when the company is able to pay.
  
• Payment Schedule: Nearly all preferred dividends are paid quarterly.
• Dividend Rate: The most common type of preferred stock carries a fixed dividend that never changes. For this reason, preferred stock prices behave like bonds.
• Liquidity: The majority of preferred stocks trade on the Toronto Stock Exchange. Preferred stock may be more difficult to sell than common stock because there is generally less demand for this type of stock.
• Callable: Preferred stock usually has a redemption date. This means the company that issues the preferred stock can buy it back at this time at a predetermined price.

For more information, please contact your Edward Jones financial advisor*.

Edward Jones has research coverage on selected companies. Research reports are available to customers in printed form from their financial advisor. For prospective customers, please contact your nearest Edward Jones branch. Research is not available to the general public. Research reports and revisions to reports are made simultaneously available to all Edward Jones Financial Advisors through the firm's intranet, where they can be printed for distribution to customers and interested parties.