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Online Share Trading

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Preference shares

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Charles23
Contributor
What exectly are preference shares? Can anyone buy these? Why do they have such high dividend yield?
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4 REPLIES 4
SimonPB
Valued Contributor
they debt instruments, dividend inked to prime .. the actually pref share price is not going to increase much, so only upside is dividend .. tis like money int he bank
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Charles23
Contributor
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Not applicable
And I never understand why companies offer them. They are the worst form of debt on a company - since the debt is in perpetuity. Unlike loans that can get paid off.
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Preston
Super Contributor
1. Preference share is classified as equity rather than debt finance, usually an alternative form of finance if company has existing restrictive covenants. 2. Cost of borrowing is usually cheaper than raising capital on the external market as funding is usually linked to an event ie prime rate.
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