Types of Preferred Stock

What this video covers

• Whether skipped dividends accumulate as dividends in arrears or disappear forever, and how that depends on cumulative versus non-cumulative preferred stock
• The strict three-step payout hierarchy for cumulative preferred: arrears first, current preferred dividend second, common stock third
• Why non-participating preferred is the default, and how participating preferred receives both its fixed stated dividend and a pro-rata share of excess common distributions
• The four conversion formulas you must memorize: conversion ratio, conversion value, parity price of common, and parity price of preferred
• When a preferred shareholder should convert based on conversion value versus market price, and why conversion is an irreversible one-way street
• The critical callable-versus-convertible distinction: who holds the option (holder or issuer), what market condition triggers each, and why the dividend rate compensates accordingly
• Why adjustable-rate preferred behaves like a floating-rate bond in pricing stability but remains legally an equity security