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Participating Preferred Stock

Participating preferred stock is a type of preferred stock that offers shareholders the right to receive dividends at a fixed rate and participate in additional profits alongside common shareholders if the company achieves certain financial targets. In liquidation events, participating preferred shareholders are entitled to their fixed dividend plus a share of any remaining assets distributed to common shareholders. This type of stock combines the fixed income features of preferred stock with potential upside from the company’s performance.

Example

A participating preferred shareholder receives a fixed 5% dividend and, if the company meets certain profit targets, is also eligible for a share of extra dividends paid to common shareholders.

Key points

• Offers a fixed dividend rate and the opportunity to participate in additional profits.

• Participates in distributions alongside common shareholders in liquidation events.

• Provides both fixed-income and growth potential benefits to investors.

Quick Answers to Curious Questions

It offers the stability of fixed dividends with the potential for additional profit participation, making it attractive for income-focused investors seeking growth.

Shareholders receive their fixed dividends first and then participate in any remaining distribution with common shareholders.

Participating preferred stockholders receive fixed dividends and can share in extra profits, while regular preferred stockholders receive only their fixed dividends.