An
equity instrument showing ownership in a
corporation which gives the holder a claim, prior to the claim of
common stockholders, on
earnings and also on corporate
assets in the event of
bankruptcy and
liquidation.
Most
preferred stock pays a
fixed dividend that is paid prior to the
common stock dividend. This dividend is either stated in a
dollar amount or as a
percentage of par value.
This stock does not usually carry voting rights.
The stock shares characteristics of both common stock and debt. For ordinary individuals, preferred stock is not a good investment.