Liquidation Preference

Liquidation preference is the amount or priority a preferred security is entitled to receive before common equity in a liquidation, subject to senior claims and governing terms.

Why this matters to income investors

This claim determines what preferred holders may recover before common holders in liquidation.

How to use liquidation preference in your research

Read the security’s payment terms, seniority, maturity or call rights, and issuer credit condition. Compare the income at your purchase price with the amount you could lose if payments stop or the security is redeemed.

This material is general education and information, not individualized investment, tax, or legal advice.