How to evaluate them As you'd expect, preferred investing is a combination of equity investing and fixed income investing. It's important to understand what the company does and how it makes cash, but as with investing in corporate bonds, it's more of a risk analysis than a company analysis. The main issue is how likely is it that this company will be unable to pay its preferred dividends. Enter coverage ratios. The higher the coverage ratio, the better.
Chances are a company with preferred stock also has unsecured debt.
Preferred shares should have a higher yield than comparable debt. The hard part is matching preferred shares with debt because preferreds can have so many caveats. It is a bit of trial and error. Sorry, no rule of thumb here. So if you're looking for less volatility and a higher cash return with more liquidity than bonds for your retirement portfolio, preferreds are worth a look.