Preferred Stock

Preferred stock is a type of equity security that represents ownership in a company and gives shareholders a higher claim on dividends and assets than common stockholders. Preferred shareholders usually receive fixed dividends paid before any dividends go to common shareholders, and in the event of company liquidation, they are prioritized for asset distribution ahead of common stockholders but after creditors and bondholders. Preferred stock often does not carry voting rights, making its features a blend of both stocks and bonds—offering predictable income with some risk protection, but typically less capital appreciation potential than common stock. Some preferred shares are convertible (can be exchanged for a fixed number of common shares), cumulative (missed dividends accrue), or callable (the issuer can redeem them at a pre-set price).