Preferred vs. Common Stock: Key Differences

What Are Preferred and Common Stocks?

Preferred and common stocks represent ownership in a company but differ in rights and benefits.

Voting Rights Explained

Common stockholders have voting rights in company decisions, typically one vote per share. Preferred stockholders usually do not have voting rights

Dividend Priority

Preferred stockholders receive dividends before common stockholders. This provides a more predictable income stream for preferred shareholders

Order of Payments in Liquidation

In the event of liquidation, preferred stockholders are paid before common stockholders. This hierarchy affects the risk level of your investment.

Fixed vs. Variable

Preferred stocks generally offer fixed dividends, while common stocks have variable dividends based on company performance.

Conclusion

Understanding the differences between preferred and common stocks is crucial. Consider your goals and risk tolerance to choose the right type for your portfolio.