Blackout Media Corp (BKMP)

[big_money_outsiders]

Preferred shares are more common in private companies, where it is more useful to distinguish between the control of and the economic interest in the company


-Almost all preferred shares have a fixed dividend amount. The dividend is usually specified as a percentage of the par value or as a fixed amount. For example Pacific Gas & Electric 6% Series A preferred. Unlike debt securities, however,a company is not legally required to pay preferred dividends and will not be in default for missing a preferred dividend payment.

In the United States issuance of publicly listed preferred stock is generally limited to financial institutions, REITs and public utilities. Because in the US dividends on preferred stock are not tax deductible (like interest expense), the effective cost of capital raised by preferred stock is 35% greater than issuing the equivalent amount of debt at the same interest rate. This has lead to the development of TRuPS (Trust-preferred security) which are essentially debt instruments with the same properties as preferred stock.

However, with a dividend tax of 15% and a top marginal tax rate of 35%[2], one dollar of dividend income taxed at these rates provides the same after-tax income as approximately $1.30 in interest.