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Advantages of Preference Shares

Advantages of Preference Shares:

Preference shares have the following important advantages.

1. Fixed dividend: The dividend rate is fixed in the case of preference shares. It is called as fixed income security because it provides a constant rate of income to the investors.

Advantages of Preference Shares
[Post Image Courtesy of LekkyJustDoIt at FreeDigitalPhotos.net]

2. Cumulative dividends: Preference shares have another advantage which is called cumulative dividends. If the company does not earn any profit in any previous years, it can be cumulative with future period dividend.

3. Redemption: Preference Shares can be redeemable after a specific period except in the case of irredeemable preference shares. There is a fixed maturity period for repayment of the initial investment.

4. Participation: Participative preference sharesholders can participate in the surplus profit after distribution to the equity shareholders.

5. Convertibility: Convertibility preference shares can be converted into equity shares when the articles of association provide such conversion.

Sourced From: Financial Management By C. Paramasivan And T. Subramanian

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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