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Define preferred stock and contrast it to common stock

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Why is preferred stock referred to as "preferred"? What are some of the features that are added to preferred stock to make it more attractive to investors? Would you select preferred stock or common stock as an investment? Why?

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Define preferred stock and contrast it to common stock

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They are preferred because these stocks carry preferential rights/ priority over common stock. Preferred stock is normally paid a guaranteed dividend which receives first priority (i.e., the common stockholders cannot receive a dividend until the preferred dividend has been paid in full) and has dibs over the common stockholders at the company's assets in the event of bankruptcy (its claim is still subordinate to that of the bond holders, however).

There are number of features that decide the relative attractiveness of a preferred stock:

There are a number of additional provisions that can affect the value of a preferred stock. Here are just a few:

Voting vs. Non-Voting: Owners of ...

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Sheetal Jain, PGDM
Education
  • BComm, University of Delhi
  • Post Graduate Diploma in Management (Equivalent to MBA), All India Management Association
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