Common vs Preferred Stock
A 1-minute lesson from the MarketPro academy, one of 18 in stock market basics.
Most companies that issue stock offer common shares, but some also issue preferred shares. Both represent ownership, but they come with different rights and different risk-and-reward tradeoffs.
Most companies that issue stock offer common shares, but some also issue preferred shares. Both represent ownership, but they come with different rights and different risk-and-reward tradeoffs.
Common Stock
- Usually includes voting rights on company matters.
- Dividend payments, if any, are not fixed and can be increased, reduced, or eliminated.
- In a liquidation, common shareholders are paid after all other obligations, including preferred shareholders.
Preferred Stock
- Typically pays a fixed dividend rate, similar in structure to a bond coupon.
- Usually carries no voting rights.
- Has priority over common stock for dividend payments and for claims on assets if the company is liquidated.
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Lesson 3 of 18 in Stock market basics
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