What are preferred stocks?

Within the spectrum of financial instruments, preferred stocks (or "preferreds") occupy a unique place. Because of their characteristics, they straddle the line between stocks and bonds . Technically, they are equity securities, but they share many characteristics with debt instruments. They're sometimes called hybrid securities .

What are the different types of preferred shares?

There are four kinds of preferred shares: convertible, callable, cumulative, and participatory. All of them offer unique benefits to the holder. While preferred stock shares some similarities with common stock and bonds, there are a few key differences as well.

Are preferred stock shares a form of equity?

And like common stock, preferred shares represent a form of equity in the company. Importantly, preferred stock shares offer some privileges that are not available to those holding common stock shares. For example, preferred stockholders have a greater claim on assets in the event of a liquidation. They also have a greater claim on dividends.