Preferred stock generally does not provide voting rights but pays a dividend. If a company pays a dividend on a common stock the dividend for a preferred stock is higher. In addition, in the event of liquidation of a company preferred shareholders come ahead of common shareholders, but still must wait until all debt holders are paid before receiving anything.
Some features of a preferred stock issue may be
- Guaranteed or cumulative dividends.
- a “call “ date.
- convertibility