Preferred Shares
Preferred shares are generally issued for $25 with a predetermined dividend yield. Holders of preferred shares primarily purchase the investment for the tax efficient income. The main types of preferred shares are hard retractable, soft retractable, and perpetual. Hard retractable preferred shares means that they have been issued for a set period, such as five years, at which time they will mature. During the five year period the investor generally receives a quarterly dividend and receives the principal amount back at maturity. Soft retractable preferred shares are term preferred shares that give the company (issuer) the option of repaying the par value in cash or in common shares. Shareholders (investors) can force redemption by the company, but the consideration offered can vary. As a result the investors retraction feature is considered "soft" (for cash or shares) as opposed to "hard" (for cash). This payment option gives the company greater flexibility because they can pay the preferred retraction in shares instead of cash if it is advantageous for them to do so. Perpetual preferred shares have no maturity date and like long term bonds are influenced by changes in interest rates and economic conditions impacting the underlying company.
