What Is Non Redeemable Preferred Stock?

Preferred stock shares offer more benefits than common stock shares. The most common benefits have to do with dividend payouts. When it comes to preferred stock redemption, there is enon-redeemable preferred stock and redeemable preferred stock.

Non-Redeemable Preferred Stock

Non-redeemable preferred stock doesn't mean you can never redeem your stock for its face value. It simply means you cannot sell the stock back to the company that issued it until a stated redemption date.

Redemption Terms

Most non-redeemable preferred stocks have clauses in the stock purchase agreement stating a specific redemption date. After that redemption date, the shareholder may convert the preferred shares to common shares. Non-redeemable preferred stock shareholders cannot convert their stock before the redemption date.

Trading

Preferred stocks offer more benefits than common shares.

Non-redeemable preferred stock holders can trade their stock for a different security at any time. They cannot, however, trade the preferred stock for common stock in the same company. Investors refer to this as a conversion.

References

• Financial Dictionary: Non-Redeemable