Preferred Stock - Frequently Asked Question Library

A preferred stock that meets the ten CDx3 Selection Criteria is a "CDx3 Preferred Stock.”

Here are three of the ten CDx3 Selection Criteria that ordinary preferred stocks must meet in order to be considered CDx3 Preferred Stocks:

The issuing company must have a perfect track record of never having suspended dividends on a preferred stock;

The preferred stock must carry a Moody’s creditworthiness rating of “investment grade” (as opposed to “speculative grade”); and

The preferred stock must be “cumulative,” which is a legal requirement that if the issuing company misses a dividend payment to you (which I have never seen happen with a CDx3 Preferred Stock), they have to make it up to you – they still owe you the money.

Of the 1,000-2,000 preferred stocks that trade on the stock market every day, only about 10 percent qualify as CDx3 Preferred Stocks.