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What is the difference between common and preferred stock?

The main difference is that common stockholders have voting rights while preferred stockholders do not. However, preferred stockholders are guaranteed rights to a share in the profits through a dividend. Additionally, preferred stockholders have liquidation preference, which means they get their money back before any common shareholders if the company’s assets are liquidated.

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  • What is common stock?

    Common stock is the most basic form of ownership in a company. For example, when you buy a share of Apple stock in your E-Trade or Robinhood account, you are buying common stock. Common stock provides ownership in the common, as well as voting rights. However, the main drawback of common stock is that in […]

  • What is preferred stock?

    Preferred stock is type of ownership in the company that has equity and debt like features. Preferred stock guarantees shareholders a specific dividend, regardless of how the company performs financially. Preferred stock typically requires dividends to be paid in arrears, which means that even if the company can’t afford a dividend in the current year, […]