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Is it better to own preferred shares of debt give this market environment?
Answers
412 points
MajorPayne answered one year ago …
I guess that's a pretty subjective question. There are several questions I'd ask before coming up with an answer for this one:
1. How liquid/illiquid is the company you're looking at?
2. What's the company's track record for meeting debt service and preferred dividend requirements?
3. What does the overall industry environment look like?
Overall, you're always safer going with debt if you think the company might go out of business....just ask Fannie and Freddie shareholders :)
But again, every situation is unique and you might be limiting your upside if you only purchase the debt of a company for "safety's sake".
379 points
dustbusterz answered one year ago …
First off, let me say that anybody who buys stock should be watching the companies they own and making sure they are solvent ,with plenty of cash on hand. If they look as if they are losing ground(and there could be the slightest question to their stability) why buy preferred shares? W
Why not sell the company, sit some money on the side, and watch it closely. This way, if things improve, you can move back in and you have saved your cash,from a possible bankruptcy situation.
If you insist on sticking it out with some Company who is High Risk, then the least you should do is get into preferred shares.You are not guaranteed to get anything out of the Company,should it go bankrupt , but you stand a better chance than if your holding common shares.
