Destra Insights

What is the difference between preferred and common stock? Preferreds are hybrid securities that blend unique characteristics of both stocks and bonds. This hybrid structure was first introduced in the U.S. by the State of Maryland in 1836 as a solution to fund their local railroad and canal companies. Over time, this structure has evolved and today is a unique hybrid that blends the following unique characteristics.

To understand the potential attractiveness of preferreds, we are going to “take a ride on the B&O Railroad”. Looking back at history may help us gain an understanding of why preferred stocks have been used for nearly two centuries by the wealthy and institutions alike as an attractive alternative and compliment to stocks and bonds, within a well-diversified portfolio.