Preferred Stock
Preferred stock is a hybrid claim with a contractual dividend, seniority above common, and usually no (or limited) voting — debt that pretends to be equity, or the reverse.
Definition
Prefs sit between debt and common: fixed or floating dividends, optional or cumulative, callable, sometimes convertible. Bank AT1/preferreds can be written down. They are not residual upside unless they convert.
Why it matters
Issuers use prefs for rating or regulatory capital. Holders buy yield and get equity-like drawdowns with bond-like upside.
Case
Credit Suisse AT1 was written to zero in 2023 while common retained scrap value. The ‘preferred’ stack was a regulatory instrument, not a senior coupon.
How to read it
Read call, coupon step-up, cumulative language, and the resolution statute. Yield is not a covenant.