Preferred stocks which deviate from the standard pattern

A.Preferred issues which deviate from the standard patter with respect to the holder's interest in income :

1.Optional-dividend issues : Gives the holder the option of receiving his dividend either in cash at a stated rate or in fractional shares of common stocks .

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2.Participating preferred issues :

(1) Participation with the common stock without priority as to dividends :

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(2)Participation with the common begins immediately after the preferred has received its prior dividend.

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(3) Participation begins after the preferred has received its prior dividend and the common has received the same amount per share .

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(4) Staggered participation .

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(5) Participation with common begins after preferred has received a prior dividend and the common has received smaller amount per share .

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(6) Participation begins after the preferred has received a prior dividend and the common has received a larger amount per share.

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(7) Participation unlimited .


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(8)Multiple Participation.

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(9) Participation limited to a stated proportion of profits without specific upper limited specific upper limit in dollars .

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(10) Participation limited to a stated proportion of profits , subject to a definite maximum per share.

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(11) Participation limited to a maximum sum in dollars.

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3.Convertible preferred issues : Such issues afford the holder the opportunity to increase his income return through shifting from the limited-income status to straight preferred stock to the unlimited contingent-income position of the common stockholder.Variations in the duration and other terms of the privilege resemble those given above for the convertible bonds and are not reported in full detail below.

(1) Duration of conversion privilege unlimited:

Typical Examples.

(2) Duration of conversion privilege limited.

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(3) Duration not subject to termination through redemption .

Typical Examples.

(4) Duration subject to termination through redemption :

Typical Examples.

(5)Conversion Privilege terminated through redemption of the issue to be extended through issuance of warrants to represent privilege.


Typical Examples.

(6) Conversion price varies with extent to which holders exercises the privilege.


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(7) Conversion price varies in accordance with a stated time schedule.

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(8) Preferred stock convertible into bonds at the company's option in case earnings meet certain minimum requirements.


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(9) Preferred which is convertible and participating .


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(10) Preferred which is convertible into a participating issue.

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(11) Preferred which is convertible at the option of the corporation into the units of common and another class of preferred stock.

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(12) Preferred issue only part of which can converted.

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4.Preferred stock with stock-purchase warrants: Such issues also afford the holder the right to modify his interest in corporate income beyond the stated dividend rate on the preferred stock alone.These warrants vary in much the same way as do those attached to bonds discussed above, and a detailed consideration of the variations would therefore be repetitious . Some of the leading variations are given below with examples of each .

(1) Preferred stocks issed with perpetual warrants :

Typical Examples.

(2) Preferred stocks issued with warrants which expire after a given date .

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(3) Warrants attached to preferred stock entitling the holder to purchase stock at a flat price throughout life of the warrant.

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(4) Preferred stock issued with warrants entitling the holder to purchase stock at prices varying in accordance with a time schedule.

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(5) Preferred stock issued with warrants for purchase of stock at prices varying with interest to which the privilege is exercised.

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(6) Preferred stock issued with warrants for the purchase of additional shares of the same issue.

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(7) Preferred stock issued with warrants for the purchase of common stock.

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(8) Preferred stock issued with warrants for the purchase of an issue senior to the common stock .

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(9) Preferred stock issued with warrants for the purchase of stock in another corporation.

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(10) Preferred stock issued with warrants which are exercisable only by payment of the subscription price in cash .

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(11) Preferred stock which may be surrendered at par in payment for common stock obtained through exercise of stock-purchase warrants.

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(12) Preferred stock issued with detachable warrants.

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(13) Preferred stock issued with warrants which are detachable only in case of redemption of the senior issue or upon exercise.

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(14) Convertible preferred stock with stock-purchase warrants.

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(15) Participating preferred stock with stock-purchase warrants .

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(16) Convertible issue with warrants and with option to receive dividends in cash or in common stock .

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5.Miscellaneous deviations with reference to the interest of the holder in income :

(1) Accumulated unpaid dividends draw interest at a specific percentage.

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(2) Preferred stock without preferences of any kind ( really common ).

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(3) Preferred stock whose dividend requirements rank ahead of the bonds of the company.

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(4) Preferred stock with dividend payment mandatory through guarantee.

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(5) Preferred dividend rate adjusted on a definite scale in relation to profits.

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(6) Preferred dividend rate dependent upon rate unpaid on other issues.

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(7) Preferred issues with definitely graduated dividend rates

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(8) Preferred stock entitled to extra dividends in directors discretion.

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(9) Dividend rate increased to compensate for loss of conversion privilege .

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(10) Preferred issue entitled to all residual earnings after a limited dividend was paid to it and then common .

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End to claim on earnings of preferred issue , next post claim of preferred issue on assets ( contd.. )