Callable Preferred Stock: A Beginner's Guide for Investors

The callable preferred stock is a type of stock that is commonly issued by corporations. Here are the basics of the callable preferred stock and how it can impact you as an investor.

Callable Preferred Stock

Callable preferred stock is a stock that comes with a par value that is issued by a corporation. The corporation can choose at their discretion to take back the shares of stock that are issued and pay the investors the par value of the stock. This makes this a very flexible type of investment for the corporation that issues it.

Investment Impact

As an investor, you will need to consider the possible impacts that this type of investment could have on you. When a company decides to redeem these shares, you may be given the choice to convert them into common stock or take the cash value. Many times, a company will also pay a premium amount on top of the par value of the stock. They may also pay any dividends that are owed to the investors before cashing them out.

With this type of investment, there is a lot of uncertainty involved. You never really know when a company will decide to cash you out and move on. Therefore, this should make up only a small portion of your portfolio overall.