Preferred Stock


DEFINITION of 'Preferred Stock'




There are certainly pros and cons when looking at preferred shares. Preferred shareholders have priority over common stockholders on earnings and assets in the event of liquidation and they have a fixed dividend (paid before common stockholders), but investors must weigh these positives against the negatives, including giving up their voting rights and less potential for appreciation.

For more on this interesting hybrid security, read A Primer on Preferred Stocks and Valuation of Preferred Stocks.


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  1. Bond

  2. Hybrid Security

    A security that combines two or more different financial instruments. ...
  3. Convertible Preferred Stock

  4. Preferred Dividend

    A dividend that is accrued and paid on a company's preferred ...
  5. Prior Preferred Stock

    A type of preferred stock with a higher claim on assets and dividends ...
  6. Participating Preferred Stock

    A type of preferred stock that gives the holder the right to ...
  1. How do changes in capital stock illustrate the overall health of a company?

  2. What is the difference between Class A shares and other common shares of company's ...

    The difference between Class A shares and other common shares of a company’s stock is usually the amount of voting rights ... Read Full Answer >>
  3. What are preferred shares?

    Preferred shares represent an ownership stake in a company. Owners of preferred shares have a claim on the company's assets ... Read Full Answer >>
  4. What is the average return on equity for a company in the insurance sector?

    The insurance sector offers an attractive investing opportunity for investors looking to diversify their portfolio with insurance ... Read Full Answer >>
  5. How can you calculate the difference between nominal value and real value of stock ...

    The nominal value, or book value, of a share is usually assigned when the stock is issued. Market value reflects what the ... Read Full Answer >>
  6. Under what circumstances is the nominal value out of line with the real value of ...

    The nominal value of stock shares is the actual face value when the shares are issued. This represents how much the stock ... Read Full Answer >>
  7. Where can I find the past record dates for a company's cash or stock dividend?

    Companies make a record when stock and cash dividends.are posted. In instances where stock is traded close to the dividend ... Read Full Answer >>
  8. Why would a company issue preference shares instead of common shares?

  9. Why should a company buy back shares it feels are undervalued instead of redeeming ...

    Repurchase and redemption are associated with different classes of stock. Common shares can be bought back by the issuing ... Read Full Answer >>
  10. What are the types of share capital?

  11. What are the main disadvantages of fixed income securities?

  12. What kind of securities should a risk-averse investor buy?

  13. Is an annuity a perpetuity?

  14. Why would a company choose to repurchase in lieu of redeem?

    When a company wants some or all of its shareholders to turn in their shares for a cash payout, it has two options: it can ... Read Full Answer >>
  15. Who uses book value to estimate the value of a company?

    Book value is primarily used by equity investors; common and preferred stockholders; and stock market analysts to estimate ... Read Full Answer >>
  16. How do I use Excel to calculate the book value per common share?

    Book value per common share is a method of stock valuation that allows investors to assess the relative safety of a stock ... Read Full Answer >>
  17. Can anyone own common stock in a company?

    Any investor on the stock market can purchase common stock. However, in some ways common stock owners have fewer rights than ... Read Full Answer >>
  18. What are some examples of preferred stock, and why do companies issue it?

    There are several reasons why a company chooses to offer preferred stock, all of which relate to the financial advantages ... Read Full Answer >>
  19. Why do preferred stocks have a face value and why is it different than market value?

    A preferred stock is an equity investment that shares many characteristics with bonds, including the fact that they are issued ... Read Full Answer >>

    A company's book value per common share is always a useful piece of information, even among seemingly stable equities. The ... Read Full Answer >>
  21. What are the pros and cons of owning preferred stock instead of common stock?

    There are a number of advantages and disadvantages to owning preferred stock over common stock shares. A common stock is ... Read Full Answer >>
  22. What is the difference between preferred stock and common stock?

    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's ... Read Full Answer >>
  23. Can preferred stocks be traded like common stocks? Are their prices the same?

    First, let's look at the differences and similarities between common stocks and preferred stocks. Both represent a piece ... Read Full Answer >>
  24. Does issuing preferred shares offer a tax advantage for corporations?

    There is no direct tax advantage to the issuing of preferred shares when compared to other forms of financing such as common ... Read Full Answer >>
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