Preferred Shares

Preferred Shares combine features of both equity and debt. Holders receive fixed dividends and have priority over equity shareholders, but usually do not have voting rights.

They are issued by companies to raise capital without diluting control significantly. Trading and issuance are regulated by the Securities and Exchange Board of India.

Key Features of Preferred Shares

• Fixed dividend rate
• Priority in dividend payment
• Priority in liquidation
• Limited or no voting rights

Types of Preferred Shares

• Cumulative: Unpaid dividends accumulate
• Non-Cumulative: No carry forward of unpaid dividends
• Convertible: Can be converted into equity shares
• Redeemable: Can be bought back by the company

Preferred Shares vs Equity Shares

• Preferred Shares: Fixed income, lower risk
• Equity Shares: Variable returns, higher risk

Why Preferred Shares Matter

• Provides stable income to investors
• Helps companies raise funds without giving control

"A company issues preference shares with a 7% fixed dividend, meaning investors receive 7% annually before equity shareholders."