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Preferred Stock


Submitted By ashlujj
Words 285
Pages 2
Name: Junjian Lu
PID: 4213070
Preferred stock and its market activities during 2005 to 2014
The preferred stock is a class of ownership in a corporation that has a higher claim on the assets and earnings than the common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.

The Preferred stock experienced a rapid development at the late 1990s. According to Standard & Poor's statistics, the total value of U.S. preferred stock market had climbed to $193 billion in 2005; however, it was not the mainstream, which is only a small part compare to the same period U.S. stock market value. Nowadays, the diversified financials and banks mainly issue the preferred stocks.

Although the preferred stock did not play a vital role in the percentage of total market, it helped the U.S. government saved the financial industry during the financial crisis in 2008. U.S. government announced a $125 billion purchase in the preferred stock of Citibank, JP Morgan Chase and other banks, which stabilized the stock market and helped them survived in the crisis. And it seems a win-win that U.S. government received marvelous dividends and the financial companies still control the company by themselves.

Due to the low liquidity of preferred stock, apparently, it is the best choice of the long-term investors. As we are in the recovery period after the financial crisis, the interest rate will rise in the future, which has a direct influence that reduces the value of preferred stock. So I believe preferred stock market does not have a bright prospects in the following

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