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Author: rubindj One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Re: Another alternative Date: 8/13/2000 1:02 AM
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Another general problem with individuals buying preferred stocks is that they tend to price like municipal bonds on the yield curve -- so if you find a preferred stock with a high yield it is probably a VERY risky investment.

The reason for this is that dividends are 70% excluded from corporate income taxes. So to an insurance company, bank, or any other company, preferred stock, which pays dividends and not interest, is priced much like a municipal bond would be to an individual.

This doesn't mean that preferreds are neccesarily bad, but just one more cautionary item when dealing with these hybrid investments.
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