Diversify your portfolio with preferred investments

Preferred stock

Although not classified as a fixed-income security, preferred stock pays dividends and has characteristics similar to those of fixed-income securities. Preferred stock has no maturity and represents a form of ownership in the issuing company.

Hybrid preferred stock
Fixed-rate capital securities are typically a combination of debt instruments (bonds) and preferred shares of equity. Though they appear to be shares of equity to investors, they actually appear as debt on the issuer's balance sheet. Dividends are paid either monthly or quarterly with yields generally higher than those of conventional preferred stock shares.

Municipal preferreds¹
Municipal preferreds—the preferred stock of exchange-traded funds—pay competitive dividends earned by a portfolio of investment-grade quality municipal bonds. Dividend rates are set at auction and reset at the end of each rate period. Dividends are paid weekly or, for longer rate periods, monthly. Most series have a rate period of seven days, though some have rate periods of one to five years. There is no guarantee that the auction process will provide investors with access to liquidity.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. For further details, please feel free to contact a Schwab Fixed Income Specialist.

1. Income may be subject to the alternative minimum tax (AMT), and capital appreciation from discounted bonds may be subject to state or local taxes. Capital gains are not exempt from federal income tax.

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Suggested next steps:

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