Preference Shares

Preference shares are instruments that have debt (fixed dividends) and equity (capital appreciation) characteristics. Preference shareholders have a higher claim on assets (repayment of capital if company is wound up) and earnings (dividends) than ordinary shareholders. Preference shareholders are paid fixed-rate dividends before dividends are paid to ordinary shareholders

Benefits

• Repayments of capital if company is wound up after (after payment of debt holders)
• Higher level of income for preference shareholders than debt holders because of the higher risk involved
• Preference shareholders have a better guarantee for dividend payout than ordinary shareholders because dividend payments are usually fixed
• Preference shareholders are guaranteed of specified percentage dividends if the company makes a profit

Who should use this product?

• Investors looking for a hybrid debt and equity investment exposure
• Investors looking for medium risk and return (risk is higher than debt instruments but lower than ordinary shares)

How to use this product?

• Contact a stockbroker