Preferred Stock: Rapid Fire

What this video covers

• Why preferred stock is equity, not debt, and why that bankruptcy priority order matters on every liquidation question
• The five types of preferred stock: cumulative, non-cumulative (straight), participating, convertible, and callable
• Who holds the power on callable versus convertible: the issuer calls when rates fall, the holder converts when common rises
• How to calculate conversion ratio, conversion value, and parity price using the $100 par standard
• Why the cumulative dividend payout order is arrears first, then current preferred, then common
• How the lack of a maturity date means preferred has no pull to par and can carry greater interest-rate risk than a comparable bond
• Why a sinking fund reduces credit risk but adds call risk to individual shares