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Definition

Shares which have preferential rights in relation to another class of share in the same company. These rights consist of: the right to receive dividends before ordinary shareholders, the right to receive a dividend which is a fixed percentage of the nominal value or par value of the shares and the right to a preferential repayment of capital in the event of the liquidation of the company. "Prefs" are generally uninteresting to any but the most conservative investor who has an income-oriented portfolio because their prices tend to remain more or less static, in line with their fixed dividends. Prefs come with many different characteristics. They can be cumulative, convertible, redeemable, participating, voting, non-voting and variable rate - or a combination of these characteristics. Thus you can get a cumulative, participating, convertible pref. You can see the prefs which a company has by studying its capital structure in your stock exchange handbook.

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