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 preferred stock & how does it work?

Preferred stock often works more like a bond than common stock does. Preferred stock dividend yields are often much higher than dividends on common stock and are fixed at a certain rate, while common dividends can change or even get cut entirely. Preferred stock also has a set redemption price that a company will eventually pay to redeem it.

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.