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Bank Preferreds

Nickname
Preferreds

Bank preferreds are a kind of hybrid security that have the characteristics of both debt and equity. It is more appealing to investors who are seeking higher yielding investments in today’s current low interest rate environment. Mostly issued by financial institutions, preferreds have several advantages as well as some risks to be aware of.

  • pay qualified long-term dividends (taxed at long-term capital gains rates)
  • Typically offer relatively high coupons
    • Can make these safer during rising rate environments

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