There are two types of stocks a person may choose from one of which is preferred stock and the other common stock. Like common stock, when a person owns preferred stock the person is a partial owner in the company but does not have the ability to vote for certain aspects of the company. One major difference in preferred stock is “preferred stock pays a fixed dividend that does not fluctuate, although the company does not have to pay this dividend if it lacks the financial ability to do so.” (Investor Guide, 2012)
People want to be able to purchase the best form of stock possible. Preferred stock is attractive to investors because preferred stock pays a fixed amount on its dividends. On the downside if a company does not have the financial backing it does not have to pay the dividend to its shareholders. One of the major reasons a person would benefit from preferred stock is that “you have a greater claim on the company’s assets than common stockholders.” (Investor Guide, 2012). Also the shareholder will also receive their dividends first which make the person feel valuable in the company. The best reason for preferred is if a company ends up going belly up the preferred stock holder will be paid off first which makes it nice and less of a risk.
As a shareholder I would definitely pick preferred the label in itself tells you that it is the keen choice for shareholders. I want to know that I am a preferred shareholder in a company. Although if I were to own a large portion of the company’s stock I would want to have common stock because I would want my vote in the decision making to count.
Investor Guide. (2012, October 16). Preferred Stock vs. Common Stock. Retrieved from http://investorguide.com/article/11166/stock-classes-the-difference -between-common-stock-and-preferred-stock-igu/