Preferred shares, also known as preference shares, are a type of hybrid security that combines features of both stocks and bonds. They offer investors a fixed dividend payment, similar to bonds, but also have the potential for capital appreciation, like stocks. Preferred shares typically have a higher dividend yield than common stocks, but they also come with less voting rights and are more susceptible to interest rate risk.
Preferred shares can be an attractive investment for investors seeking income and stability. They offer a higher yield than bonds, but with less risk than common stocks. Preferred shares can also provide diversification to an investment portfolio. However, it is important to note that preferred shares are not without risk. They can be subject to interest rate risk, and their value can fluctuate with changes in the market.