Canadian Securities Course (CSC) Practice Exam

Which type of preferred shares pays no dividend until a future maturity date?

1. Deferred preferred shares

2. Foreign-pay preferreds

3. Delayed floater preferred

4. Convertible preferreds

The correct answer is: Deferred preferred shares

Preferred shares are stocks that are issued by a company, allowing owners to receive dividend payments before common stockholders. In case the company experiences financial troubles or goes bankrupt, preferred stockholders get priority over the common stockholders in terms of the distribution of assets. Deferred preferred shares, also known as deferred dividend shares, are a type of preferred shares that do not pay dividends until a certain date in the future. This means that while the shareholders will eventually receive dividends, they will not receive them immediately. The incorrect options are B, C, and D. Foreign-pay preferred shares (B) are types of preferred shares issued by foreign companies, which pay dividends in a currency other than the shareholder's home country currency. Delayed floater preferred shares (C) are issued with floating interest rates, meaning that the dividend rate changes periodically according to the prevailing market conditions. Lastly, convertible preferred shares (D) are typically issued with the option to be converted into common shares, rather than having a maturity date for dividends.