Preferred stock is a good alternative for risk-averse investors wanting to buy equities. In general, they are less volatile then common stock and provide a better stream of dividends. Most preferred shares are also callable, meaning the issuer can redeem the shares at any time, so they provide investors with more options than common shares . For example, a cumulative preferred stock instrument may require payment of all accumulated and unpaid dividends if the entity declares a dividend on its common shares, or if the holder exercises an option to convert its preferred shares to common stock. On January 1, Year 1, ABC Corp. issues 1,000 convertible preferred sharesfor their face amount of $1,000 per share ($1,000,000 proceeds). The preferred shares are redeemable by ABC (but not mandatorily redeemable) and there are no embedded put options that could allow the holder to require ABC to redeem the shares.