Terms

Series

7.625% Series A Preferred Stock

Liquidation Preference

$25.00

Coupon Rate

7.625%

Rate Type

Fixed

Annual Dividend

$1.91

Payment Frequency

Quarterly

Cumulative

No

Perpetual

Yes

Convertible

No

Callable

Yes

First Call Date

July 12, 2010

First Call Price

$25.00

Redemption Notice Period

30 days

Capital Stack Ranking

Junior To: All Debt Obligations Of Hovnanian Enterprises, Inc.; Pari Passu With: Any Other Series Of Preference Stock Or Parity Equity Securities; Senior To: Common Stock, Any Junior Equity Securities

Regulatory (Basel III) Call

No

Tax Classification

Qualified Dividend

Qualifies for QDI

Yes

Qualifies for DRD

Yes

Depositary Share Fraction

0.001

Shares Offered

5,000,000

Prospectus Summary

Hovnanian Enterprises, Inc. is offering 5,000,000 depositary shares, each representing 1/1,000th of a share of its 7.625% Series A Non-Cumulative Preferred Stock, with a liquidation preference of $25.00 per depositary share. The fixed annual dividend is $1.90625 per depositary share (7.625% of $25.00), paid quarterly on January 15, April 15, July 15, and October 15, commencing October 15, 2005. The stock is callable at par on or after July 12, 2010. Critically, dividends are non-cumulative: if Hovnanian does not declare a dividend for any quarterly period, holders have no right to receive or recover that missed payment, meaning income is not guaranteed and missed payments do not accrue. The Series A Preferred Stock ranks senior to Hovnanian's common stock and all future junior equity with respect to dividends and liquidation distributions. It ranks pari passu with any other parity preferred stock Hovnanian may issue. However, as an obligation of the holding company rather than a subsidiary, it is structurally subordinated to all debt at both the holding company and operating subsidiary levels — all creditors and lenders are paid before preferred holders in a distress scenario. There is no regulatory capital call provision, as Hovnanian is a homebuilder, not a bank. The prospectus notes that debt instruments limit the company's ability to pay dividends, adding practical risk to the non-cumulative structure. At the $25.00 offering price, the effective yield is 7.625% annually, or approximately $0.4766 per depositary share per quarter. Record dates fall on January 1, April 1, July 1, and October 1 — approximately two weeks before each payment date. Dividends paid by Hovnanian, a C-corporation, are expected to qualify for the preferential qualified dividend income (QDI) rate for individuals and the dividends-received deduction (DRD) for corporate holders, though this is not explicitly confirmed in the prospectus. The dividend stopper prevents Hovnanian from paying any dividends on common stock or junior equity in any quarter in which Series A dividends have not been declared and paid, providing a measure of protection to preferred holders — though given the non-cumulative nature, any missed quarter is permanently lost.

Summarized from the SEC prospectus filing.

Distribution History

Ranking vs. Other Preferreds

Dividend Stopper Provisions

Dividend Stopper Description

If Hovnanian has not declared and paid (or set apart) dividends on the Series A Preferred Stock for the current quarterly period, it may not pay dividends on its common stock or any other junior equity securities.

Div Score Breakdown

Reinvesty's multi-factor safety analysis for this preferred, composite score: 56 (Average)