The Zero-Dividend Preferred Stock

Many investors purchase preferred stock because it provides them with a number of benefits. One alternative to the traditional type of preferred stock is referred to as zero-dividend preferred stock. Here are the basics of zero-dividend preferred stock and what it provides to you as an investor.

Zero-Dividend Preferred Stock

Traditional preferred stock provides you with a type of stock that is superior to common stock; however, it may not come with any voting rights in the company. Many traditional forms of preferred stock will provide investors with a regular dividend payment. When you purchase a share of zero-dividend preferred stock, you will have the same type of stock, but you cannot receive a dividend payment. This type of stock forgoes that and keeps all of the profits for the company itself.

As an investor, you will be looking for all of your gains from capital appreciation in the price of the stock itself. Therefore, this type of stock may not be attractive to those that seek the regular income that a dividend stock can provide.

In the event of bankruptcy of the corporation, a zero-dividend preferred stockholder could have a right to some of the assets of the company and receive a one-time dividend payment.

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