Preferred Stock and Interest Rates

What this video covers

• Why preferred stock is called the Peter Pan investment: no maturity date means no pull to par and no yield to maturity (YTM)
• How the interest rate seesaw works for preferred stock, and why fixed-rate preferred carries more interest-rate risk than a bond with the same coupon
• Which type of preferred stock has the lowest interest-rate risk, and why adjustable-rate preferred keeps price stable near par
• Why callable preferred caps upside when rates fall, and what the investor receives instead of unlimited price appreciation
• How to calculate current yield on preferred stock: annual dividend divided by market price, and why this replaces YTM entirely
• The discount versus premium yield relationship: discount to par means yield higher than the stated rate, premium to par means yield lower
• How to recommend the right preferred stock type for each rate environment (falling, rising, and callable traps)