Houston Chambers

How is a preferred stock similar to a bond?

1. Preferred stock always contain a maturity date. 2. Dividends are limited in amount. 3.Both contain a growth factor similar to common stock. 4. Dividends are deductible for tax purposes.

Public Comments

1. 2. Dividends are limited in amount.
2. Preferred stocks almost never have a maturity date. Dividends are not required whereas interest is required. Only preferred stocks (and especially convertible preferred stock) and convertible bonds are growth oriented. Dividends are never deductible for the entity and are taxed at ordinary income for preferred stock (so keep in a tax-deferred vehicle like a RothIRA). I'm glad you checked with us to make sure you had your facts straight so you don't lose money.