Preference Shares Singapore

Preference shares in Singapore are a class of equity that pays a fixed dividend to shareholders before any dividends are distributed to ordinary shareholders. In a liquidation, preference shareholders are repaid before ordinary shareholders but after all creditors and bondholders. This page is for informational purposes only and does not constitute financial advice.

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What Are Preference Shares in Singapore?

Preference shares (also called preferred shares) are a hybrid security combining features of both equity and debt. They offer holders a fixed dividend that takes priority over ordinary shareholders. In Singapore, preference shares are most commonly issued by banks, insurance companies, and occasionally REITs and property developers as a form of quasi-debt capital that counts toward regulatory equity requirements.

How Preference Shares Work

Preference shareholders receive a stated fixed dividend — as a percentage of par value or a fixed dollar amount — before any dividend is paid to ordinary shareholders. If the company cannot pay (e.g. insufficient retained earnings), ordinary dividends are suspended entirely until preference dividends are cleared. Preference shares typically carry no voting rights — the trade-off for income priority.

Most Singapore-issued preference shares are perpetual with an issuer call option — no maturity date but the issuer can redeem at par on specified call dates, typically every 5 years. This creates call risk: if rates fall and the issuer calls the shares, you may be forced to reinvest at lower yields.

Types of Preference Shares

Cumulative: unpaid dividends accumulate and must be fully paid before ordinary dividends. Non-cumulative: missed dividends are lost permanently — higher risk for income investors. Convertible: can be converted into ordinary shares at a specified ratio. Redeemable: have a set redemption date. Most Singapore bank preference shares are non-cumulative and perpetual with call dates.

Preference Shares vs Ordinary Shares vs Bonds

Think of the capital structure as a hierarchy: bonds at the bottom (most secure, lowest yield), preference shares in the middle (fixed income but equity-like risk in liquidation), ordinary shares at the top (highest upside, most residual risk). Preference shares yield more than investment-grade bonds to compensate for lower legal priority. Compare using the Dividend Portfolio Yield Calculator.

Risks of Preference Shares

Key risks: (1) Call risk — issuer redeems early, forcing reinvestment at possibly lower rates; (2) Interest rate risk — perpetual/long-dated instruments see prices fall when rates rise; (3) Credit risk — financial difficulty can suspend preference dividends; (4) Liquidity risk — many Singapore preference shares have thin secondary market trading versus more liquid Singapore Savings Bonds.

Where to Find Preference Shares in Singapore

Singapore-listed preference shares can be found via SGX under the bond/preference share section, or on bond platforms like FSMOne. Major issuers have included DBS, OCBC, UOB, and CapitaLand. For conservative income investors, consider whether preference shares are appropriate versus simpler alternatives like SSBs or perpetual bonds. Always read the issuance prospectus carefully before investing.

Frequently Asked Questions — Preference Shares Singapore

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