## Preferred Shares: An Investment Option Often Overlooked, But Better Than You Think

In the stock investment world, most investors tend to rush into buying common shares, which seem to be the only option in the investment universe. But in reality, there is another tool that should not be forgotten: **Preferred Shares**. Although they do not receive as much attention as common shares, they offer many advantages that can help strengthen your portfolio.

### Why are preferred shares better than you think?

When comparing preferred shares to common shares, the main differences are in rights and risks. Preferred shareholders do not have voting rights at the shareholders' meeting; only common shareholders have this right.

But that’s not a disadvantage. On the contrary, preferred shareholders will always receive dividends before common shareholders. And in situations where the company must liquidate, these investors will be compensated from the sale of assets before debts are paid off. These features make **preferred shares** safer and suitable for those who do not want their stock portfolio to carry excessive risk.

### How many types of preferred shares should you know?

**Preferred Shares** are not just a single type. Companies issue them in various forms to give investors more options.

**Type 1: Cumulative and Non-Cumulative Dividends** Investors may receive dividends at a fixed rate regularly, or sometimes the company may decide not to pay in a given year. However, the unpaid dividends will accumulate in the company's account, increasing the company's value over the long term.

**Type 2: Redeemable and Non-Redeemable** Some companies issue **preferred shares** with conditions allowing them to buy back the shares. Investors should be aware that their shares might be called back at some point.

**Type 3: Convertible or Non-Convertible** Here, investors have an interesting choice: continue holding preferred shares or convert them into common shares as specified, offering greater flexibility.

**Type 4: Participating and Non-Participating** Some preferred shares pay fixed dividends, while others may receive additional dividends based on the company's performance, or none at all.

### How to invest in preferred shares?

Buying **preferred shares** is not much different from buying common shares. There are two channels:

**First channel: Primary Market** When a company issues **preferred shares** anew, investors can register to buy from the start by transferring funds at the price set by the company. The shares will then be deposited as share certificates or in a no-certificates account, as preferred.

**Second channel: Secondary Market** If you miss the primary market opportunity, you can buy on the stock exchange. However, be cautious as liquidity is much lower than common shares. On the stock exchange, **preferred shares** are marked with "-P" at the end, such as KTB-P, SCB-P, or BH-P.

### See real dividend payout examples

Krung Thai Bank has preferred shares (KTB-P) that pay dividends as follows:

Year 2021: Preferred share KTB-P paid 0.4295 THB, while common shares KTB paid only 0.275 THB.

Year 2020: Preferred shares paid 0.9075 THB compared to common shares paying 0.753 THB.

Year 2019: Preferred shares paid 0.8725 THB versus common shares paying 0.718 THB.

This data shows that if you are only interested in cash flow from dividends and voting rights are not a concern, holding **preferred shares** of the bank might yield better returns.

### Important to remember: Limitations of preferred shares

The biggest drawback is the difficulty in selling them due to very low liquidity. If you need quick cash and want to sell before the company calls the shares back, you might not get a good price. Therefore, investing in preferred shares should be planned with a long-term perspective. Short-term trading profits are not advisable.

### Who should invest in preferred shares?

**Preferred Shares** are suitable for:
- Investors seeking safety over aggressive profits
- Those wanting steady cash flow from dividends to support daily life
- Institutions and large corporations benefiting from tax advantages
- Investors who do not mind giving up voting rights at the shareholders' meeting

In summary, **preferred shares** are a proven investment tool. Although they are not as popular as common shares, for those seeking a balance between safety and growth potential, adding preferred shares to your portfolio is worth considering.