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For those who opt for preferred stocks, can your dividends be reinvested? Also, would the dividends of preferreds be covered by the new tax laws? I ask because I'm wondering if a preferred is a better investment for my IRA or for my regular account.

Thanks in advance!

Sal
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would the dividends of preferreds be covered by the new tax laws? I ask because I'm wondering if a preferred is a better investment for my IRA or for my regular account.

Preferreds issued by REITs do not qualify for the 15% rate.

A lot of other so called preferreds do not qualify because they are really interest income. A lot of companies, utilities and financials for example, issue preferreds from Capital Trusts, which are subsidiaries set up for that sole purpose. The Capital Trust sells its own preferred stock. The parent then borrows the money raised and pays interest to the Capital Trust so that there will be money to pay the dividend. Years later the parent repays the loan and the Capital Trust redeems the preferred stock.

Quantum on line has a list of preferreds that they believe will qualify for the 15% rate. It takes about a minute for the list to load.

http://www.quantumonline.com/pfdtable.cfm?Type=TaxAdvPfds&SortColumn=Company&SortOrder=ASC
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