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(TLDR: this article describes google’s bond-like convertible stock. )
Alphabet Convertible Preferred Offers 6% Yield and Upside With Common Stock
**By Andrew Bary**
**June 09, 2026 4:23 pm EDT**
**Key Points**
\- Alphabet issued over $19 billion in mandatory convertible preferred stock, offering a 6.25% annual dividend yield.
\- The offering funds Alphabet’s $180 billion to $190 billion AI capital expenditures, with conversion to common stock in three years.
\- Investors gain a high-dividend alternative but face downside risk as the preferred stock lacks protection if common stock drops.
[Alphabet](https://www.barrons.com/market-data/stocks/googl?mod=article_chiclet)’s new convertible preferred offers investors a 6%-plus dividend yield and upside potential if the company’s stock appreciates.
The company [offered more than $19 billion](https://s206.q4cdn.com/479360582/files/doc_news/2026/Jun/03/attachments/Alphabet-Pricing-Press-Release_2026-06-03.pdf) of the mandatory convertible preferred last week in two equal parts at $50 a share, and both issues are trading actively on the Nasdaq. The high yield on the preferred stock compares with just a 0.2% payout on [Alphabet](https://www.barrons.com/market-data/stocks/googl?mod=article_chiclet)
Alphabet, the parent of Google, also sold about $18 billion of new common stock last week and plans to sell another $40 billion of common stock starting in the third quarter as it funds massive capital expenditures projected at $180 billion to $190 billion this year to build its artificial-intelligence capabilities. The total equity raise is more than $85 billion.
The first preferred tranche, which is convertible into Alphabet’s class A voting stock, is trading Tuesday under the ticker symbol GOOGM at $50.70, a slight premium to the offering price o **f** $50 a share. The second tranche, which is convertible into Apple’s nonvoting class C shares, is also around $50.70 and trades with the ticker GOOGN.
The twin offerings—each totaling 192.5 million shares—were the largest mandatory convertible preferred issues in market history. Each issue carries a 6.25% annual dividend yield based on the offering price of $50, and a slightly lower yield now.
Mandatory convertible preferred stock “is effectively yield-enhanced common stock,” says Michael Youngworth, head of global convertibles research at BofA Securities.
Unlike a traditional convertible offering that promises that holders will get their original investment back at maturity, mandatory convertibles will get exchanged for common stock in three years.
This means that investors are exposed to downside in Alphabet stock while participating in the upside subject to the conversion premium.
The mechanics are a little complicated with mandatory convertibles. The Alphabet deals had conversion premiums of 25%. The upshot is that holders will get back $50 a share if Alphabet common stock is between roughly $360 a share and around $440 a share—the terms are slightly different on the two issues. Above $440 or so, investors fully participate in the upside in Alphabet stock. Below around $360 a share on the common and preferred holds stand to get back less than $50 a share in three years.
Alphabet’s Class A shares (GOOGL) were trading late Tuesday at $364.25 and the C shares (GOOG) at $363.12, both up less than 0.5% in the session.
The price of the mandatory convertible preferred should track Alphabet common stock. The delta on the convertibles is estimated at around 70%, according to Bloomberg, meaning holders of the preferred will see a 70-cent increase for a $1 increase in the common stock. The delta. however. will change with the movement in the common stock.
“They have a high delta to the (common) shares and no bond floor since holders are required to convert to shares at maturity—no option to get par back, like in a traditional convert. Investors are compensated for this by getting a larger dividend payment,” Youngworth told *Barron’s* in an email.
For those familiar with options, the mandatory convertible amounts to common stock plus the sale of a call spread.
The benefit to Alphabet is that if its stock rallies, the mandatory convertibles are less dilutive than an issue of common stock, but the company must pay a higher yield on the preferred than the common.
For yield-oriented investors, the Alphabet mandatory preferred offers a liquid, high-dividend alternative to the company’s common stock. Just realize that the preferred doesn’t offer downside protection if the stock drops.