Preferred Stock vs Common Stock
Equity with a fixed dividend and priority over common, usually without votes. An ownership share in a company, with voting rights and last claim on assets.
What is the difference between Preferred Stock and Common Stock?
Common = votes, variable dividend, unlimited upside. Preferred = no votes, fixed dividend, priority, bond-like behavior.
| Preferred Stock | Common Stock | |
|---|---|---|
| In one line | Equity with a fixed dividend and priority over common, usually without votes. | An ownership share in a company, with voting rights and last claim on assets. |
| Example | A $25 par preferred paying 6% pays $1.50 a year; if rates rise, its market price falls like a bond's. | One share of a company with 1 billion shares outstanding is a one-billionth claim on residual earnings. |
| Unit | Securities & Instruments | Securities & Instruments |
| Series 65 | Section 2: Investment Vehicles | Section 2: Investment Vehicles |
What is Preferred Stock?
A hybrid: legally equity, economically closer to a bond. Preferred pays a stated dividend, ranks ahead of common for dividends and in liquidation, and typically carries no voting rights. Prices move mostly with interest rates rather than with earnings.
What is Common Stock?
Equity ownership. Common shareholders vote on corporate matters, may receive dividends when declared, and participate in growth without limit - but they stand last in line behind creditors and preferred holders in a liquidation.