26.0k views
5 votes
Preferred stock is attractive to investors PRIMARILY because it:

a. is not subject to call.
b. earns a higher dividend than common stock.
c. entitles the holder to special subscription rights.
d. prioritizes the entitlement for payments ahead of common stock.

1 Answer

6 votes

Final answer:

Preferred stock is primarily attractive to investors due to the priority it gives to dividend payments over common stock, providing a more consistent income stream.

Step-by-step explanation:

Preferred stock is attractive to investors primarily because it prioritizes the entitlement for payments ahead of common stock. When a company distributes its profits in the form of dividends, preferred stockholders are typically guaranteed a fixed dividend ahead of common stockholders.

This means that if a company has enough funds to pay dividends, preferred stockholders receive their dividends before any dividends are paid to common stockholders. Owning preferred stock can provide a more consistent income stream compared to common stock, which may have dividends that vary based on the company's performance and dividend policy.

User Alsk
by
8.5k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories