Zero-Dividend Preferred Stock

Zero-dividend preferred stock (also known as non-dividend-paying preferred stock) is a type of preferred stock that does not pay a dividend. This type of stock is often issued by companies that are in their early stages of development or that are experiencing financial difficulties. Zero-dividend preferred stock can be attractive to investors because it typically offers a higher yield than common stock. However, investors should be aware that zero-dividend preferred stock is riskier than common stock because it does not offer any protection against a decline in the company's share price.

There are two main types of zero-dividend preferred stock: callable and non-callable. Callable preferred stock can be redeemed by the issuing company at a specified price. Non-callable preferred stock cannot be redeemed by the issuing company.

The price of zero-dividend preferred stock is typically determined by the company's credit rating, the dividend yield, and the market interest rate. The dividend yield on zero-dividend preferred stock is the annual dividend divided by the stock's price. The market interest rate is the rate of return that investors can earn on other investments with similar risk.

Zero-dividend preferred stock can be a good investment for investors who are looking for a high yield. However, investors should be aware of the risks associated with this type of stock.