What is the difference between common stock and preferred stock?

Usually, common stock allows the shareholder to vote, but preferred stock often does not confer voting rights. Both common and preferred stockholders can receive dividends from a company. However, preferred stock dividends are specified in advance based on the share's par or face value and the dividend rate of the stock.

What is a preferred stock?

Preferred stock is a distinct class of stock that provides different rights compared with common stock. While both types confer ownership in a company, preferred stockholders have a higher claim to the company's assets and dividends than common stockholders. This elevated status is reflected in the name “preferred” stock.

What are the different types of preferred stock?

One type of preferred stock, the perpetual preferred stock, guarantees a fixed dividend in perpetuity. Another type, convertible preferred stock, offers investors the opportunity to convert preferred shares into common stock. Common stock represents shares of ownership in a corporation and a claim on profits.