No. of Recommendations: 6
YTM asks: Say in a hypothetical scenario the preferred shares have been "called."

The shares will be redeemed for $25 principal on October 30th.

Putting aside the call development; a dividend is normally paid on October 30th to share holders as of the record date of October 15th.

If you came in and bought the already known "called" shares on October 13th, would you still get basically two weeks worth of interest?


YTM, if you buy shares after the ex-dividend date of October 13, you will NOT receive two weeks worth of interest. We had this discussion on the board a few years ago about a called PSA preferred. The dividend paid on October 30 is for the period that includes the two weeks between the record date and the pay date. This whole dividend goes to the owner that sold before the ex-dividend date.

Let's assume the issue was called for November 15th. In that case, you would be paid interest from October 30th through November 15th. The previous owner still gets the interest for the October 15 through October 30 period.

This is the norm for the called issues I have looked at in detail. It is NOT well spelled out when an issue is called. I had to learn this the hard way on one of the PSA preferreds when I did NOT receive the 2 weeks of interest.

Thanks,

Yodaorange
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