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Triangle- The Preferred Asset Class
Nov 8, 2017 12:00 am
While preferred securities have been around since the 16th century in Europe and the 1850’s in the United States, they often remain overlooked as an asset class. Often grouped into one category, preferreds come in several different varieties, generally depending on how they are listed on a company’s balance sheet; the variety has significant impact on whether a coupon payment is classified as an interest payment (and therefore an obligation), or as a discretionary dividend. Furthermore, preferred securities can differ by their face value , usually either $25 par or $1000 par, by how they are traded over the counter or exchange traded, and by their coupon structure: fixed-for-life, floating rate, or fixed-to-floating rate.
Craig Sullivan, CFA