What Is the Difference Between Preferred Stock & Regular Stock?
Most people have some familiarity with the terms "common stock" and "preferred stock." Both classes of stock offer ownership interest in a company, but investors receive different benefits based on the stock's class.
Other People Are Reading
-
Stock Classes
-
A company assigns different classes to its stock. Stock classes can include callable preferred, convertible preferred, cumulative preferred and more. The two most common classes are common stock and preferred stock.
Common Stock
-
Most investors purchase a company's common stock. Common stock typically pays a dividend and offers the shareholder voting rights at annual shareholder meetings.
-
Preferred Stock
-
Preferred stock typically does not offer voting rights. Preferred stock shareholders receive dividends before common stock shareholders.
Preferential Treatment
-
If a company fails, preferred shareholders stand among the first to receive payment, along with a company's creditors. Common shareholders are last in line to receive any compensation.
Dividends
-
Specific company rules dictate the exact terms of preferred stock, but most preferred shareholders receive a fixed dividend payment. Common shareholders receive a dividend based on earnings per share after operating expenses are accounted for.
-
