Preferred Stock Dividends: An Introduction

Preferred stock dividends are an income source that I rarely discuss. I have a strong presumption against them because: (1) Preferred stock dividends present an unfortunate trade-off compared to common stock dividends because there is no dividend growth or substantial capital appreciation; (2) Preferred stock dividends usually come from the finance and energy sector, creating an incongruity between the stereotypical retired investor that wants safe preferred stock dividends compared to the relatively unstable sectors of the economy that fund them; and (3) the low interest rates available through traditional channels have led income seekers to consider preferred stock dividends at a time when the general valuation of publicly traded preferred stocks is unattractive.

It’s not an area of the economy that interests me because the payoff of trying to develop expertise in the world of preferred stock dividends is not nearly as lucrative as trying to gain an edge in … Read the rest of this article!