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Common
stock is the kind most investors own. When you own common stock, you
generally receive voting rights, and you receive dividends if and when the
company's board of directors decides to pay them. If the company were to be
sold, common stockholders would have the right to a share of the value of the
company's assets—that is, if any are left after the company pays off creditors,
bond holders, and owners of preferred stock.
Preferred stock is called "preferred" for that
reason—its owners have a prior claim to the company's assets over the owners of
common stock. Preferred stock usually doesn't include voting rights, and it pays
a fixed dividend. As a result, while preferred stock pays off in a predictable
manner, its holders do not share in the company's changing fortunes in the way
common stockholders do. For that reason, preferred stock isn't preferred by most
investors! |
