Preferred stock is a hybrid⎯a sort of cross between a common stock and a bond⎯in the sense that it pays dividends that normally increase annually like a stock but its payments are contractually guaranteed like interest on a bond.

Question

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Preferred stock dividends are not guaranteed in the same way bond interest payments are, and they do not typically increase annually like common stock dividends might. Preferred dividends are set at a fixed rate and can be suspended by the company in financial distress.

Preferred Stock Is a Hybrid⎯a Sort of Cross Between a Common