Characteristics of Preferred Shares

Investors often compare various securities when building a portfolio, including preferred shares, which are known for their specific characteristics. Unlike common shares, preferred shares typically pay fixed dividends and have priority in the event of liquidation.

However, the features of preferred shares can vary widely based on the issuing company’s terms. Some preferred shares may be convertible into common shares or may come with a cumulative dividend feature. Understanding these nuances is essential for making informed investment decisions.

Considering the aforementioned characteristics, which of the following statements about preferred shares is CORRECT?