Preferred Stocks versus Common Stocks

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Preferred stocks are a class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock usually also have dividends that must be paid out before dividends to common stockholders. One downfall however is that as a preferred stockholder you do not have voting rights. Each corporation has unique preferred stockholder liabilities and voting rules. The best way to look at preferred stock is to see it as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation.

There are many things to consider when looking at purchasing preferred or common stocks because there are pros and cons to both...