Preferred Stock

Preferred stock represents a different segment of ownership which has a greater claim on the company’s assets than common stockholders, but they do not enjoy any voting rights. They also have priority over common stockholders when it comes to dividends which means that preferred stockholders are paid the dividends before paying them to common stockholders.

 

In general, there are four types of preferred stock:

1. Cumulative: These stocks give their owners the right to “accumulate” dividend payments that were skipped due to financial problems. They are the first to receive their missed payments when company resumes paying dividends.

2. Non-Cumulative: These shares do not give pay back payments for skipped dividends.

3. Participating: These shares may receive higher dividend payments if the company earns a larger than expected profit.

4. Convertible: These shares may be converted into a specified number of shares of common stock.