Common or Preferred Stocks

[Quaker639]

Which do you buy & Why?

[Quaker639]

I understand the difference between them...
am just wondering if any of you mess with preferred stock?

[reggie02]

It depends what you are looking for; dividend income or stock appreciation.

The primary difference is that preferred shares have seniority over common shares in terms of any money left over after bankruptcy. They also receive dividend payments that common stockholders don't. There are generally fewer preferred shares available and they are almost always less liquid. Their price is more stable and usually does not appreciate or deppreciate as much.

They sometimes carry voting rights that common shares don't.


Bottom line:

Buy common shares if you are young and playing the stock market.

Buy preferred shares if you are looking for dividend payments for income potential.

[reggie02]

I am not in the USA, but I think Dividends and capital gains are taxed differently, meaning that capital gains are not as heavily taxed as dividends. This may play a part in your decision as well.

[domafia]

Originally Posted by reggie02

I am not in the USA, but I think Dividends and capital gains are taxed differently, meaning that capital gains are not as heavily taxed as dividends. This may play a part in your decision as well.

In the USA, it is the opposite. Dividends are taxed at a flat rate of 15% whereas capital gains are generally taxed at a higher rate (based on your income and whether the gains are short-term or long-term).

[Quaker639]

thanks guys