preferred stock’s dividend is paid first—in preference—before any payments due to the common stock. In the typical case, where the dividend amount is fixed, the preferred is like a bond but more risky because the dividend payments and the claim on assets upon liquidation are only paid after the corresponding bond payments. A so-called convertible preferred is one that can be exchanged for a specified number of shares of the common. So a convertible preferred is like a convertible bond but less secure, as it is paid only if there is enough money to do so after the bondholders receive their
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