In October 2025, San Miguel Corporation raised P49 billion through a single preferred share offering, one of the largest capital raises in the history of the Philippine Stock Exchange. That figure alone signals that preferred shares are not just a niche instrument for institutional players—they are a significant vehicle for companies to raise capital and for investors to secure predictable income. For Filipino investors accustomed to the volatility of common stocks or the low yields of savings accounts, preferred shares offer a middle ground that deserves a closer look.
Preferred shares are often described as a hybrid between stocks and bonds. You buy them like a stock on the PSE, but instead of uncertain capital gains, you receive fixed dividend payments, much like bond interest. The catch is that these dividends are paid before any dividends go to common shareholders, and if the company is liquidated, preferred shareholders get paid before common shareholders but after bondholders. That positioning in the capital structure is what gives preferred shares their name—and their relative safety compared to common equity.
How Preferred Shares Work in the Philippine Market
Unlike common stocks, preferred shares typically do not come with voting rights. You are trading a say in corporate governance for a more predictable income stream. That trade-off makes sense for investors who prioritize cash flow over control. The dividend rate is fixed at issuance and does not change with the company’s earnings, which means your income is stable but does not grow if the company prospers.
Why Companies Issue Preferred Shares—and What It Means for You
When a company like San Miguel issues preferred shares, it is not giving away ownership control. It is raising capital without diluting the voting power of existing common shareholders. SMC’s P49 billion raise, for example, was used to refinance short-term loans, redeem older preferred shares, and fund infrastructure projects including the New Manila International Airport in Bulacan. For the investor, that context matters: the proceeds are going into tangible assets and debt reduction, not speculative ventures.
But the same structure that benefits companies also creates a risk for you. Preferred shares are often callable, meaning the company can buy them back at a predetermined price after a certain date. If interest rates fall, the company is likely to call the shares and reissue new ones at a lower dividend rate, leaving you with cash that you must reinvest at lower yields. That is exactly what SMC did with its Series 2-F, 2-J, and 2-K shares—it redeemed them using proceeds from the new offering. As an investor, you need to check the call schedule before buying.
Another factor that changes the answer is the dividend rate relative to current market conditions. SMC’s Series 2 preferred shares offered dividend rates between 6.9650% and 7.5360%. At a time when time deposit rates hover around 4–5%, that spread is attractive. But if interest rates rise, the market price of your preferred shares will fall, because newer issues will offer higher rates. You can hold and collect the fixed dividend, but if you need to sell before maturity, you may take a loss on the principal.
Fine Print That Catches Many Investors Off Guard
Dividend Taxation
Preferred share dividends are subject to a 10% final withholding tax for individual investors, just like common stock dividends and interest income. That means the 7.5360% rate on SMC2U becomes roughly 6.78% after tax. Factor this into your yield calculations before comparing with tax-exempt instruments like certain government bonds.
Liquidity on the PSE
Not all preferred shares trade actively. While SMC’s offerings were oversubscribed 1.5 times, smaller issuers like EEI Corporation, which raised P6 billion through its preferred shares in 2021, may have thinner trading volumes. If you need to exit quickly, you might have to accept a discount to the fair value. Check the average daily volume before committing a large position.
Credit Risk Varies by Issuer
A preferred share is only as safe as the company behind it. San Miguel is a P160 billion conglomerate with diversified revenue streams, but smaller companies carry higher risk. Filinvest Development Corporation raised P8 billion through its first preferred share offering 43 years after its IPO, while Ayala Corporation raised P20 billion. The dividend rate often reflects the risk: higher rates usually mean higher risk. Compare the issuer’s credit rating and debt profile before investing.
Multiple Series, Different Terms
Companies often issue multiple series of preferred shares with different dividend rates, call dates, and maturity terms. SMC’s October 2025 offering alone included three series (2-S, 2-T, 2-U) with staggered rates. Each series may have a different priority in the capital structure. Read the prospectus for each series, not just the company name.
What To Do With This Information
If You Are an Income-Seeking Investor
Preferred shares can replace or supplement time deposits and bonds in your portfolio. The dividend rates are typically higher than bank savings products, and the payments are more predictable than common stock dividends. To get started, open a brokerage account with any PSE-accredited broker. Once funded, search for preferred share tickers on the PSE website or your broker’s trading platform. Look for the dividend rate, call date, and trading volume before placing an order.
If You Are Comparing Multiple Offerings
Use a table to compare key terms across issuers. The table below shows recent preferred share offerings from major Philippine companies. Note that dividend rates, issue sizes, and use of proceeds vary significantly.
→ Scroll right to see all columns
| Company | Amount Raised | Dividend Rate Range | Use of Proceeds |
|---|---|---|---|
| San Miguel Corporation | P49 billion | 6.97%–7.54% | Refinance loans, fund airport and tollway projects |
| Ayala Corporation | P20 billion | Not disclosed in source | General corporate purposes |
| Petron Corporation | P16.83 billion | Not disclosed in source | Follow-on offering, Series 4D and 4E |
| Filinvest Development Corp. | P8 billion | Not disclosed in source | First preferred share offering |
| EEI Corporation | P6 billion | Not disclosed in source | Series A and B preferred shares |
If You Want to Participate in a New Offering
New preferred share offerings have a subscription period, typically lasting one to two weeks. For SMC’s July 2026 offering, the subscription period runs from July 15 to July 23, with dividend rates announced on July 13. To subscribe, you need to submit an application through any of the joint issue managers, which include Bank of Commerce, BDO Capital, BPI Capital, China Bank Capital, Land Bank, and others. You will need to fund your subscription in full by the deadline. If the offering is oversubscribed, you may receive a partial allocation.
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If You Are Monitoring the Secondary Market
After listing, preferred shares trade on the PSE just like common stocks. You can buy them at market price, which may be above or below the par value of P75 per share, depending on interest rate movements and demand. SMC’s exchange offer allowed holders of Series 2-J and 2-K shares to exchange them for new series, with 251.47 million shares tendered. If you already hold preferred shares, watch for exchange offers—they can be a way to improve your yield without additional cash outlay.
Frequently Asked Questions
Are preferred shares safer than common stocks? ▾
Can I lose money on preferred shares? ▾
How are preferred share dividends taxed? ▾
Do preferred shares have voting rights? ▾
What is the minimum investment for preferred shares? ▾
Can I sell preferred shares anytime? ▾
What happens if the company calls my preferred shares? ▾
How do I find upcoming preferred share offerings? ▾
Preferred shares are not a one-size-fits-all solution. They work best for investors who want higher income than bonds or savings accounts, can tolerate moderate price volatility, and are comfortable locking in a fixed rate for several years. The key is to match the instrument to your timeline: if you need the money in two years, a preferred share with a five-year call protection period may not be ideal. Read the prospectus, compare dividend rates across issuers, and always factor in taxes and liquidity before committing capital.
If this was useful, you might also want to read a beginner’s guide to investing in bonds in the Philippines.
Sources
Understanding Filipino investment mindset through risk tolerance and financial behavior — Explores how risk tolerance shapes investment choices, including fixed-income instruments like preferred shares.
Is the Philippine stock market overvalued? A critical look at market trends — Provides context on market valuation that affects preferred share pricing and demand.
San Miguel lines up P30 B capital raise, largest on PSE this year. InsiderPH, 2025.
SMC starts P30 billion preferred share offer. Philstar, 2025.
SMC raises P49 billion from preferred shares. Philstar, 2025.
PSE preferred share listings. Philippine Stock Exchange, 2025.
San Miguel Corporation lists maiden exchange offering and follow-on offering Series 2 preferred shares. Business Mirror, 2025.
