Preferred Stock Gains Momentum Among Investors
Dow Jones Newswires</br></br>Investors are showing a renewed interest in, if not a preference for, preferred stock.</br></br>A company's preferred stock generally pays a fixed dividend that yields more than a company's common stock. It is less subject to sudden price swings, and it is called preferred because of its place in line ahead of holders of common stock in case of a bankruptcy proceeding and liquidation.</br></br>In addition, a preferred dividend is paid out before a common dividend. And it is much less likely for a preferred dividend to be cut.</br></br>Preferred shares enjoyed a surge in popularity after a new tax law was enacted during President Bush's first term, which cut the tax rates on dividends to an average of 15% from as high as 38.6%. They are enjoying another renaissance now as investors turn to them to get better yields in a lower interest-rate environment and also to seek shelter from the volatile equity market.