Are there any tax considerations for investors holding the preferred versus common shares that could affect demand?

Tax‑driven demand differential

Farmer Mac’s Q3 dividend of $1.50 per share applies to both its common (Class A) and preferred series, but the tax treatment of those payouts is not identical. Common‑stock dividends are generally classified as qualified dividends for U.S. investors, meaning they are taxed at the lower long‑term capital‑gain rates (0 %–20 % depending on the investor’s bracket). Preferred‑stock dividends, on the other hand, are usually treated as ordinary (non‑qualified) dividends and are taxed at the investor’s ordinary income rate, which for most high‑income traders can be 37 % or higher. Consequently, the after‑tax yield on the preferred shares is materially lower than the headline 1.5 % payout, especially for those in the top tax brackets.

Market and trading implications

Because the tax drag on preferred‑stock yields is built‑in, price‑sensitive investors—particularly income‑focused retirees and high‑tax‑rate institutions—tend to favor the common shares where the net return is more tax‑efficient. This bias can translate into a relative premium on AGM.A versus the preferred series and tighter bid‑ask spreads on the common stock. From a technical standpoint, AGM.A has been holding a modest uptrend (≈ 10 % YTD) and is testing the $30‑$32 resistance band; the preferred series, which trades at a modest discount to the common, is more prone to sell‑offs on any hint of a dividend‑tax change or a widening spread.

Actionable take‑away

If you are a taxable investor, the after‑tax yield differential should be factored into position sizing: overweight AGM.A (Class A common) for a cleaner, qualified‑‑dividend profile and consider limiting exposure to the preferred series unless you have a tax‑advantaged account (e.g., a Roth or a corporate portfolio) that can absorb the higher ordinary‑dividend tax. Anticipate modest upside on AGM.A if the market continues to price in the tax‑efficiency premium, while the preferred shares may face downward pressure if the spread widens further. Monitor the dividend‑announcement calendar and any IRS guidance on qualified versus ordinary dividends, as a shift could quickly re‑balance demand between the two share classes.