The reason they can be such a good deal has to do with the way corporate balance sheets are put together. All corporations are financed with equity, represented by common stock. Most also borrow money, usually by selling bonds. The bonds have first claim on the company's assets, so they're the safest investment. But any increase in the company's value goes to the equity.
Preferred stock is a third category, falling between common stock and bonds.
Preferreds have a stronger claim on company assets than common shares do, making them a safer investment. And like bonds , preferreds have a fixed payout, with yields on many high-quality issues running more than 8 percent. In addition, they're far more convenient than bonds, particularly for individual investors with limited funds. Preferreds do have a couple of drawbacks. Unlike common stock, they barely benefit from increases in the company's value.