Preferred Stocks

Like common stock, with preferred stock you also have a share of ownership in the company.  Preferred stockholders have the first rights to dividends.  Most preferred stocks pay a fixed dividend, set at the time of issuance, stated in a dollar amount or as a percentage of the par value Bonds.  Preferred stocks are similar to corporate bonds, without a maturity date.  Because it is a fixed dividend, a preferred stock shareholder does not share in the potential growth of the company’s profits that a common shareholder would realize.  However, if a company goes bankrupt or liquidates, preferred stockholders have a better claim to the company’s assets than common stock shareholders (bond holders trump all stockholders).  Preferred shares do not change as often as common shares.