Q: Hi 5i
As a clarification of my most recent question about FTN " are the preferred shares fixed" what I meant is; is the preferred shares dividend at risk of being cut ?
Thx
As a clarification of my most recent question about FTN " are the preferred shares fixed" what I meant is; is the preferred shares dividend at risk of being cut ?
Thx
5i Research Answer:
Like any preferred, the dividend is not guaranteed. However, due to the structure of the split share corporation, the main purpose of having the net asset value test on the Class A shares is to protect the integrity of the preferreds. Class A dividends will stop if the portfolio declines in value, and this provides some protection to preferreds. But in a very sharp market event (it would need to be pretty bad) the preferred dividends could still be at risk.