Types of Preferred Stock

What this video covers

• Why cumulative preferred dividends in arrears must be paid before common shareholders receive anything, and why arrears appear only in footnotes, not as balance sheet liabilities
• How to calculate total cumulative preferred payout including arrears plus the current year's dividend, and the trap of giving common stockholders a partial cut
• The key distinction between cumulative preferred (skipped dividends accumulate) and non-cumulative or straight preferred (skipped dividends are lost forever)
• Why participating preferred is the exception, not the default, and what double dipping into extra dividends actually means
• The four convertible preferred formulas: conversion ratio, conversion value, parity price of common, and parity price of preferred
• When an investor should convert preferred to common, and why conversion being a one-way street often leads investors to stay put for the dividend stream
• Why callable preferred pays a higher dividend than non-callable, and the exact difference between callable (issuer's right, exercised when rates fall) and convertible (holder's right, exercised when stock rises)