No. of Recommendations: 11
The best source of information on preferred stocks is QuantumOnLine.com. Enter the ticker symbol and up comes complete information including call price and date. For more detail read the original prospectus for the issue. Sometimes call provisions can be complex with different call prices on different dates. The QuantumOnLine listing has a link to the original prospectus. (But note the bond ratings shown there can be out of date.)

Most preferred stocks do not have a maturity date. They continue forever until called. If there is a maturity date, it will be in the prospectus.

The preferred stocks that must make up missed dividend payments are called cumulative preferred stocks. Some issues now allow the company to omit payment of dividends for specified periods in bad times, but I have not heard of any that actually did this. Usually an omitted dividend is very bad for stock price.

Usually when an issue is called, all of the shares are called in. So there are no further dividends. The offered amount for the call is usually for the call price and dividends to that date.

Partial calls where some but not all shares are called are possible, but rare. Then often they tender for the shares. So those who decide to sell get paid, while others keep their shares. Then the original terms still apply to remaining outstanding shares. The dividend continues as before. No it does not float.

The call provision essentially gives the issuer the right to refinance the "loan" represented by the preferred shares. When interest rates fall, the issuer can refinance at lower cost. So he will likely call the issue as soon as other cheaper funding sources come available. If interest rates go up, it would cost him more to refinance, so he does not call even if he could. Similarly if his bond rating goes down making borrowing more costly or business times make it more difficult to get financing, the issuer is less likely to call.

Otherwise, the decision to call a preferred stock is very much like refinancing your mortgage. There are some costs involved. And you might rather wait if you think rates will be lower next year than this year. Similarly, the issuer may have a series of other preferreds or bonds out there. Then he will probably use available funds to call the most costly ones first.

So frequency of calls varies with the condition of the market. Right now, calls are not so common. Two years ago with rates low and financing easily available they were common.

Not to worry about asking questions. Ask away if you have more or if these brief comments require explaining.
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.