From an investor's perspective, a firm's preferred stock is generally considered to be less risky than its common stock but more risky than its bonds.However, from a corporate issuer's standpoint, these risk relationships are reversed: Bonds are the most risky for the firm, preferred is next, and common is least risky.

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From an investor's perspective, bonds are considered less risky due to their fixed income and priority in case of liquidation, making preferred stock riskier than bonds but less risky than common stock due to dividend preferences and sometimes additional protections. For the issuing firm, however, common stock is least risky because dividends are not obligatory and can be suspended without risking bankruptcy, whereas bonds have fixed obligations that increase financial risk, and preferred stock sits in the middle, having fixed dividends that are typically obligatory but can sometimes be deferred.

From an Investor's Perspective, a Firm's Preferred Stock Is Generally