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First-Preferred Stock

Moneyzine Editor
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Moneyzine Editor
1 mins
November 6th, 2024
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First-Preferred Stock

Definition

The term first-preferred stock refers to a security that has seniority over all other forms of equity issued by a corporation. First-preferred stock receives preferential treatment in terms of dividend payments as well as assets in the event of liquidation.

Explanation

First-preferred stock is a security that provides holders with the first claim to dividends. This means investors will receive their dividend payment before common stockholders and other preferred stock issued by the company. In the event of liquidation, first-preferred stock also has a claim to assets that is superior to other equity holders. However, first-preferred stock remains subordinate to bond holders, meaning the lenders have a superior claim to assets.

In addition to the above features, first-preferred stock will normally include a fixed dividend amount, typically specified as a percentage of the security's par value. Although some preferred shares may have special voting rights, these issues usually do not include this feature.

Related Terms

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    The term baby bond refers to indentures and other fixed income securities with a par value that is less than $1,000. The term baby bond can also refer to a series of bonds issued by government entities during the first and second world wars.
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  • Contingent Voting Power
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  • Monthly Income Preferred Stock (MIPS)
    The term monthly income preferred stock refers to a security that possesses the features of both preferred stock and bonds. Monthly income preferred stock is considered a hybrid security that dominated the market at one time due to a tax shelter loophole that has since been closed.
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  • The term private investments in public entities refers to the selling of publicly-traded securities to private investors. Private investments in public entities typically involve the sale of convertible bonds, common or preferred stock.
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