Preferred stocks are usually held by bond traders, people specialized in fixed-income securities.
The Preferred Stocks are a debenture, and are never meant to be permanent securities on the capital structure because they are very expensive compared to similar obligations issued by the company. Hence, they are redeemable in certain dates specified in their contract.
The financial companies that maintain the JPS on their balance sheets during many years, are defrauding the shareholders. JPM, BAC, etc., they all have JPS, and they rather repurchase common stocks than JPS, to guarantee their crony investors high returns on their investments.
This hybrid financial instrument, is the fastest way to build capital complying with the regulatory capital requirements and leverage the companies (more investment power), where the profits of this leverage go to the shareholders in the form of Retained Earnings. But then, the JPS must be switched in the capital structure for the Retained Earnings account over time (core capital too), otherwise they would continue to pay for the costly outsiders (known as "the others"), the JPS.
The JPS get a hefty dividend payment. But there is a catch: it's suspended for capital adequacy purposes. This is why they are core capital to begin with: loss-absorbing capacity, like any item therein (Retained Earnings account, Additonal Paid-In Capital, common stocks, noncumulative dividend JPS)
In the FnF case, the regulator even prohibits dividends until FnF meet 25% of the capital buffers (Table 8)
But in a Conservatorship, there is risk of dividend suspension even after meeting 100% of capital buffers in the case of Freddie Mac at the end of 2022 (separate account plan), due to a ruthless conservator abusing on its Incidental Power ("any action authorized by this section, in the best interests of FnF and FHFA"), who now defers to Congress the release in an attempt to make up for their losses, with what Bradford would call "reverse engeneering", that is, the wishful thinking of attempting to reverse the JPS's losses with a conversion to Common Stock that would make the JPS whole playing with the conversion ratio, and phony damages in the Lamberth court to recover back dividends on a noncumulative dividend stock. It ain't gonna happen.
Regulatory Risk. Blame FHFA.
News 
Market Data 
Discover 
