Types And Recovery Methods Of Preferred Stock

　　 preferred stock The main characteristics are three: first, the preferred stock usually sets the dividend yield in advance. Since the dividend rate of preferred stock is fixed in advance, the dividend of preferred stock will not be increased or reduced according to the company's operating conditions, and generally it can not participate in the dividends of the company. However, preferred stock can get dividends before the common stock. For the company, because of the fixed dividend, it does not affect the profit distribution of the company. Two, the right scope of preferred stock is small. Preferred shareholders generally do not have the right to vote and to be elected. They do not have the right to vote for the major operation of a joint stock company, but in some cases they can enjoy the right to vote.

If the shareholders' meeting of the company needs to discuss the claim related to the preferred stock, that is, the claim of preferred stock is prior to the common stock, while the priority of the preferred stock is mainly reflected in two aspects: (1) the priority of the preferred stock lies in the following aspects: (1) dividend Priority is granted. The order of share dividend distribution is preferred stock before the common stock. No matter how much profit the share company may make, as long as the shareholders' meeting decides to distribute dividends, the preferred stock may receive dividends according to the predetermined dividend rate. Even if the dividend is generally reduced or no dividend is paid, the preferred stock should also be distributed on dividends.

(2) priority of residual asset allocation. In the dissolution and bankruptcy liquidation of a joint stock company, preferred stock has the priority of assigning the remaining assets of the company, but the priority distribution right of the preferred stock is after the creditor and before the common stock. Only after paying off creditors' debts can the preferred stock have the right to distribute the remaining assets. Only after the preferred stock claims can the common stock participate in the distribution.

There are many types of preferred stock in order to adapt to some of the priority benefits that are specifically sought. Investor There are various ways to classify the priority muscles. The main classifications are as follows:

(1) cumulative preferred stock and non cumulative preferred stock. Cumulative preferred stock refers to a company that, within a business year, is entitled to claim the same amount of dividends if the company's earnings are not sufficient to distribute the required dividends. For a non cumulative preferred stock, although the profits obtained by the company will have priority over ordinary shares to earn dividends, if the profits of the company are not sufficient to distribute the dividends according to the stipulated dividend, the shareholders of the non cumulative preferred stock can not ask the company to reissue the company in the following years. Generally speaking, for investors, cumulative preferred stock is more advantageous than non cumulative preferred stock.

(2) participation in preferred stock and non participating preferred stock. When the profits of enterprises increase, besides enjoying the interest of the established ratio, they can also participate in the preferred share of profits distribution with the common stock, which is called "participating preferred stock". In addition to established dividends, the preferred shares no longer participate in profit distribution are called "non participating preferred shares". Generally speaking, participation in preferred stock is more beneficial to investors than non participation in preferred stock.

(3) convertible preferred stock and non convertible preferred stock. Convertible preferred stock refers to allowing the preferred stock holder to convert the eugenic stock into a certain amount of common stock under certain conditions. Otherwise, it is impossible to convert preferred stock. Convertible preferred stock is an increasingly popular stock in recent years.

(4) the preferred stock and the non retractable preferred stock can be recovered. The recoverable preferred stock is a company that allows the issuance of such shares to recover the preferred shares at the original price plus some compensation. When the company believes that it can replace the preferred stock with lower dividend, it often exercises this right. On the contrary, it is the non retractable preference shares.

There are three ways to recover preferred stock:

<1> premium method. When a company redeem a preferred stock, it is carried out at a predetermined price, but because it often brings inconvenience to investors, the company often adds a premium at the face value of preferred shares.

In the event of preference shares, <2> has raised some funds from the funds it acquired to create a "sinking fund", which is used to redeem part of the preferred shares periodically.

<3> conversion mode. That is, preferred stock can be converted into common stock according to regulations. Although convertible preferred stock constitutes a category of preferred stock, it is often regarded as a practical way to recover preferred stock in foreign investment circles, but the initiative of withdrawal is not beneficial to investors but to investors.