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Why do preferred shares act like bonds?

If an investment looks like a stock, sounds like a stock but acts like a bond, it may well be a preferred share.

Preferred shares come in many forms. Some preferred shares are considered equity investments because they look more like common stocks and some are considered debt because they look more like bonds. Investors who seek the capital gains potential of common stocks but also want high dividends often invest in preferred shares. Some companies issue more than one class of preferred shares and they are identified separately. For example, separate preferred share issues outstanding may be referred to as: $22.50 Series Class A; $22.70 Series Class A, and Series Class B. Common characteristics of preferred shares: Note When it comes to preferred shares, whether the preferred issue is more like a stock or a bond will affect the market price. For example, a simple preferred issue with a fixed dividend acts more like a bond and the price of this preferred will react to fluctuations of interest rates, just as bonds do. On the other hand, if the preferred issue is a convertible issue, it will react to changes in the market price of the common share.