Which of the following is true with regard to preferred stock?
A) Dividends must be paid each year on preferred stock.
B) The growth potential of preferred stock is limited due to its fixed dividend.
C) Preferred stock is more risky than common stock.
D) The usual par value of a preferred share is $1.
E) It cannot be callable.

Question

Quizplus · Accepted Answer

Preferred stock typically pays a fixed dividend, which limits its growth potential compared to common stock, which can increase in value. However, preferred stock is generally less risky than common stock because dividends must be paid before common stock dividends and in the event of liquidation, preferred stockholders have a higher claim on assets. Dividends are not required to be paid each year on preferred stock and the usual par value can vary. Some preferred stock can be callable, meaning the issuer has the right to buy back the shares at a predetermined price.

Which of the Following Is True with Regard to Preferred