Preferred stock is less risky for investors than is common stock because:
A) Common stock pays dividends as a stated percentage of face value.
B) Common stock has priority over preferred stock with regard to earnings and assets.
C) Preferred dividends are usually cumulative.
D) Preferred stock with no conversion feature has a higher dividend yield than does convertible preferred stock.

Question

Quizplus · Accepted Answer

Preferred dividends are usually cumulative, meaning if a company misses a dividend payment, it must pay it in the future before any dividends can be paid to common stockholders, making preferred stock less risky.

Preferred Stock Is Less Risky for Investors Than Is Common