Investopedia: Prefer Dividends? Why Not Look At Preferred Stock?

Everybody assumes that there is a lot of demand for, and interest in, articles and columns detailing growth stock ideas. While that is true to a point, it is also true that there is a strong interest in income ideas as well. What is interesting, though, is how relatively little there is out there about preferred stocks and their close cousin, trust preferred securities. While these are not flawless investment options, they should be a serious consideration for many income-oriented investors. 

Preferreds - Some Good, Some Bad
In brief, preferred stock is something of a hybrid security that combines features of fixed income and common equity. Preferred stock is higher up in the credit structure than common equity and preferred shareholders are almost always entitled to dividends before common shareholders get any. On the other hand, preferred stock does not grant voting rights and investors often see significantly limited upside when the company thrives, as preferred stock dividends are usually locked in while common stock dividends can be whatever management can afford to pay. (For more, see A Primer On Preferred Stocks.)

Investors should also realize that their choices are quite a bit more limited when it comes to the companies and industries that issue preferred stock. Look at the rolls and investors will see a lot of banks and real estate companies, as well as some insurance and utility companies. By and large, industrial, health care and tech companies have no need to issue these securities.


To read the full piece, please go here:
http://stocks.investopedia.com/stock-analysis/2011/Prefer-Dividends-Why-Not-Look-At-Preferred-Stock-USB-TCB-TYY-WMT-C-BAC-GS0411.aspx