Recently started investing in preferred shares, it got confusing when I started reading offers of these shares.Here are some of the terms used in the preferred shares world:
Cumulative preferred stock - If the dividend is not paid, it will accumulate for future payment.
Non-cumulative preferred stock - Dividend for this type of preferred stock will not accumulate if it is unpaid. Very common in TRuPS and bank preferred stock, since under BIS rules, preferred stock must be non-cumulative if it is to be included in Tier 1 capital.[8]
Convertible preferred stock - This type of preferred stock carries the option to convert into a common stock at a prescribed price.
Exchangeable preferred stock - This type of preferred stock carries the option to be exchanged for some other security upon certain conditions.
Participating preferred stock - This type of preferred stock allows the possibility of additional dividend above the stated amount under certain conditions.
Perpetual preferred stock - This type of preferred stock has no fixed date on which invested capital will be returned to the shareholder, although there will always be redemption privileges held by the corporation. Most preferred stock is issued without a set redemption date.
Putable preferred stock - These issues have a "put" privilege whereby the holder may, upon certain conditions, force the issuer to redeem shares.
