As a result of the financial crisis, many REITs cut common stock dividends as part of a painful but necessary cash flow strategy.

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Health Care Property Investors (nyse: HCP - news - people ) recently declared its 67th consecutive increase in quarterly common stock dividends, while Public Storage (nyse: PSA - news - people ) has seen its stock rise some 30% since this time last year.

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Most companies use share buybacks or pay special dividends on their common stock to return excess cash to shareholders.

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The preferred, with dividends, easily outperformed the common stock.

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Given the reliance on cash flow to fund dividends, be careful not to overlap common stock holdings with preferred stock holdings.

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Preferred stock compensates investors for diminished voting rights by giving them priority over common shareholders for dividends and typically by paying higher comparative yields.

FORBES: Why Warren Buffett Prefers Preferred Stock