Preferred Stock
A class of ownership with priority over common stock for dividends and asset claims, typically offering fixed dividends but limited voting rights.
Preferred Stock
A class of capital stock that provides certain advantages over common stock, typically including priority in dividend payments and asset distribution upon liquidation, though usually with limited or no voting rights.
For example, a corporation might issue $10 million of 5% preferred stock, obligating it to pay $500,000 in annual dividends to preferred shareholders before any distributions to common shareholders, while giving these investors priority claims on assets if the company dissolves.
Preferred stock combines features of debt (fixed dividend payments) and equity (potential for price appreciation and perpetual life). Various features may include cumulative dividends, convertibility to common stock, callability by the issuer, or participation in additional profits, making it a flexible financing instrument with characteristics that can be tailored to market conditions and investor preferences.