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According to the answers here, voting rights don't really matter when it comes to the price of shares. Also, I am not sure about the US market, but in the Korean market, a preferred share usually pays more dividends than a common share (commonly by 1/100th of the face value each time [1]). However preferred shares are usually traded at a discount; for example a Samsung Electronics preferred share is approx. 10% cheaper than their common share counterpart. What is the reason? If voting rights don't really matter, shouldn't preferred shares be more expensive?

[1] http://www.thevaluenews.co.kr/news/view.php?idx=3633&mcode=m81dvn9 (in Korean)

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  • Are you certain this is all preferred stocks in Korea or just Samsung?
    – D Stanley
    Feb 23 at 22:53
  • @DStanley Some preferred stocks pay the same dividends, but I don't know any that pay less, or a fixed amount. There may be exceptions because there are thousands of companies, but they must be rare.
    – Jaeseop Ahn
    Feb 23 at 23:25

2 Answers 2

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Preferred stocks are bond-like with a fixed dividend (unless it's a floating rate issue) and a redemption price.

Because of the redemption price, there is less of a chance for price appreciation with preferreds. Therefore, preferreds offer higher dividends in order to compensate for the lack of share price appreciation. It's an income versus growth decision.

In the US, most preferred stocks are trading at lower prices than in recent years. This is due to the increase in interest rates over the past year.

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I don't have the answer but some factors to consider:

  • preferreds pay a dividend in perpetuity whereas common stock pays a variable, potentially higher, dividend
  • buy backs that disproportionately affect common stock
  • suspension of dividends for whatever reason
  • discount rates (next dividend vs dividends in perpetuity)

https://www.samsung.com/global/ir/stock-information/shareholder-return/

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    In the US, it's possible that a common stock might pay a larger dividend per share (dollars) but in terms of yield, preferred dividends are larger. I have no clue what goes on in the Korean market.
    – Bob Baerker
    Feb 24 at 19:01

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