Preference shares, also known as preferred stock, are shares of a corporation’s stock that pay dividends to owners before common stock payments are paid out. Preferred investors have a right to be compensated from the business’s assets before common stockholders if the company goes bankrupt.
Preference shares often have a set dividend, but ordinary equities do not. Preferred stockholders often have no voting rights, but regular stockholders usually have.
Preference shares are those shares which are given preference as regards to payment of dividend and repayment of capital. The term “preferred stock” refers to the fact its holders receive preferential treatment over common stockholders in the event of liquidation and when dividends are paid. They do not enjoy normal voting rights. In the case of preference shares a fixed dividend is declared every year.