Whether you are considering buying or selling, understanding the potential or actual annual rate of return of a preferred stock investment is important to any strategy. But accurately calculating this key value can be a bit tricky.
There are a variety of calculations, each of which use a variety of assumptions and, therefore, offer values that can vary. The calculation that you use depends on how closely these assumptions align with your objectives.
And some calculations are more useful for certain types of investments than others. Bond investors, for example, are use to analyzing "Yield-To-Call" or "Yield-To-Maturity" values while those investing in bank Certificates of Deposit look at "Annual Percent Return" or "Annual Percent Yield."
While all of these values can be meaningful and interesting, they all have strengths and weaknesses when applied to a preferred stock investment...
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Many Happy Returns.
There are a variety of calculations, each of which use a variety of assumptions and, therefore, offer values that can vary. The calculation that you use depends on how closely these assumptions align with your objectives.
And some calculations are more useful for certain types of investments than others. Bond investors, for example, are use to analyzing "Yield-To-Call" or "Yield-To-Maturity" values while those investing in bank Certificates of Deposit look at "Annual Percent Return" or "Annual Percent Yield."
While all of these values can be meaningful and interesting, they all have strengths and weaknesses when applied to a preferred stock investment...
Note To Readers: This article was chosen to appear on the popular investing website 'Seeking Alpha'.
By clicking here a new window/tab will open on your screen to this article as it appears at SeekingAlpha.com.
Receive my Seeking Alpha articles by email: When viewing one of my articles at Seeking Alpha, click on the "Follow" button under my picture. You will be notified by email when I post a new article to Seeking Alpha.
Please enjoy reading this article at Seeking Alpha.
Many Happy Returns.
