Preferred Stock
Preferred stock has features similar to both equity and debt. Like a bond, it promises
to pay to its holder a fixed amount of income each year. In this sense preferred stock
is similar to an infinite-maturity bond, that is, a perpetuity. It also resembles a bond in
that it does not convey voting power regarding the management of the firm. Preferred
stock is an equity investment, however. The firm retains discretion to make the dividend
payments to the preferred stockholders; it has no contractual obligation to pay those
dividends. Instead, preferred dividends are usually cumulative; that is, unpaid dividends
cumulate and must be paid in full before any dividends may be paid to holders of com-
mon stock. In contrast, the firm does have a contractual obligation to make the interest
payments on the debt. Failure to make these payments sets off corporate bankruptcy
proceedings.
Preferred stock also differs from bonds in terms of its tax treatment for the firm.
Because preferred stock payments are treated as dividends rather than interest, they are
not tax-deductible expenses for the firm. This disadvantage is somewhat offset by the fact
that corporations may exclude 70% of dividends received from domestic corporations in
the computation of their taxable income. Preferred stocks therefore make desirable fixed-
income investments for some corporations.
Even though preferred stock ranks after bonds in terms of the priority of its claims
to the assets of the firm in the event of corporate bankruptcy, preferred stock often
sells at lower yields than do corporate bonds. Presumably, this reflects the value of the
dividend exclusion, because the higher risk of preferred would tend to result in higher
yields than those offered by bonds. Individual investors, who cannot use the 70% tax
Game Stop CI A
GME
16.74
0.17
1,584,470
26.66
16.36
0.60
3.58 6.80
230.63
Gannett GCI
14.65
20.04 4,277,615
16.26
8.28
0.80
5.46 8.07
9.57
Gap
GPS
28.47
0.50
5,952,210
29.23
15.08
0.50
1.76 16.88
53.48
Gardner Denver
GDI
48.30
0.08
797,258
92.93
45.54
0.20
0.41 9.01
237.32
Gartner IT
45.71
20.14 580,056
46.69
31.98 ....
.... 30.98
31.46
GasLog GLOG
10.24
0.08
126,666
13.34
8.76
.... .... 217.49
GATX
GMT
38.76
0.27
226,825
45.50
28.90
1.20
3.10 15.19
211.22
Gaylord Entertainment
GET
37.78
0.44
273,954
40.37
17.39
....
.... 105.03
56.50
Gazit-Globe GZT
9.30
20.11
2,152
11.07
8.41
0.43
4.61 ....
21.59
GenCorp GY
6.69
20.01 321,785
7.27
3.74 ....
.... 93.96
25.75
Genco Shipping&Trading
GNK
2.79
0.04
355,441
10.14
2.72
....
.... ....dd 258.73
Generac Holdings
GNRC
22.21
20.14 169,519
30.61
15.41 ....
.... 4.36 220.76
General Cable
BGC
26.80
0.47
322,159
45.20
20.21
....
.... 19.43 7.16
General Dynamics
GD
64.69
0.65
1,359,120
74.54
53.95
2.04
3.15 9.31
22.59
General Electric
GE
19.72
0.13 45,307,178
21.00
14.02
0.68
3.45 16.01
10.11
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