Preferred Stock is a stock that has a higher right than ordinary shares. That looks like half debt and half owner... Dividends of preferred shares are pre-determined fixed rates. And it is considered a fixed expense of the company even if the company does not pay a dividend in an unprofitable year...
Preferred Stock is an equity instrument. similar to common stock just that there is no right to vote in the administration There are differences from ordinary shares. Preferred shareholders are entitled to repayment of capital before ordinary shareholders in the event of company liquidation... Preferred shares on the stock boards can be seen from the symbol -P at the end of the initials of the common stock. It is there to give rights to the capital group in return for helping the business in times of crisis or crisis. Preferred shares are therefore entitled to receive dividends even in the year that the business does not pay dividends... Let's say that the business can make a profit of 500 million baht, but still hasn't paid dividends because it wants to use the profits to invest in expanding the business. Therefore, shareholders who hold ordinary shares do not receive dividends. But the preferred shares receive the same dividends because the dividends of the preferred shareholders are pre-determined. This is what preferred stocks are superior to ordinary shares... Preferred shares There will be no right to vote at the meeting, that is, "preferred shares receive dividends, but they are forbidden to vote at the meeting" because assuming that if there is a meeting, there may be a disturbance in the matter of interfering with the management. Or can seize management power in the company's business ...
However, preferred shares can be roughly divided into...
1- Cumulative Preferred Stock is a type of preferred stock in which shareholders are entitled to receive dividends in the year that dividends are not declared.
2- Non-cumulative Preferred Stock is a type of preferred stock that, in any year, does not pay dividends. will not be able to carry forward to pay in the next year
3- Joint-receiving preferred shares (Participating Preferred Stock) is a preferred stock that the shareholders are entitled to receive dividends together with the common shareholders. After receiving dividends at the specified rate
4- Non-Participating Preferred Stock is a preferred stock that receives dividends only at the specified rate.
The advantages of financing by issuing preferred stocks are flexibility and flexibility. There is no redemption period and the preferred shares are the owners' equity. Therefore, the issuance of preferred shares allows the company to maintain its position and power... If there is a need to provide additional funding in the future issuance of preferred shares As a result, the business may not need to issue new ordinary shares, so it does not affect the share price. and the issuance of preferred shares does not require collateral assets This allows the business to use existing assets as collateral for other types of debts....
The disadvantage of financing by issuing preferred stocks is that dividends will be paid to the preferred shares higher than the interest rate of the bonds. Preferred share dividends are not taxed in calculating net profit. Dividends of preferred shareholders are pre-set rates... At present, the popularity of investing in preferred stocks is less. Due to some disadvantages for preferred shareholders such as no voting rights in the administration, etc...
Let's summarize in a way that is easier to understand. What is Preferred Stock?
1- Preferred Stock is intended to raise funds from the public.
2- The holder of the instrument, the preferred stock (Preferred Stock) is the owner of the business.
3- Holders of Preferred Stocks have no right to vote at the meeting. 4- The privilege of Preferred Stock is entitled to early repayment of capital. ordinary shareholder In the case of the company liquidation 5- Return Preferred Stock is a dividend payment at a fixed rate (Fixed).
6- Preferred Stock on the stock board can be seen from the symbol -P at the end of the abbreviation of common shares.
Finally, we have already understood what Preferred Stock is and how it is useful. Currently, Preferred Stock is not very popular. compared to ordinary shares But for those who are interested in becoming investors, it is imperative that we understand the business before we consider investing in our own best interests. For today, my hair ends like this first. See you again in the next articles... ^_^ ...
Article and lectured by : Dolravee Phattharakulpimol
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