What are preferred stocks?

The preferred shares is the name of a special category of shares that has properties distinguishing from the general or "common" stock of the same company. This may include benefits like the first in a row to obtain dividends or have priority before the claims if the company goes into liquidation. There are certain disadvantages, in particular that preferred shares usually do not come with voting rights.

The exact characteristics of preferred shares differ from company to company. The most common thing is that anyone who holds preferred shares will be higher in the order of kneeling, if the company is liquidated and distributes its assets among the creditors. Depending on the shares rules, the holders of the preferred shares either receive the amount they have invested or the market value of their shares when the company was liquidated. As long as there is enough money left in society, these holders will receive this amount back as a flat amount. Holders of ordinary shares Wilws I expect in accordance with others believeThe sole and usually only receive a part of the money that is "owed". This dividend pays off before the dividend payments to the holders of ordinary shares. Payments to normal shares will be determined year by year and usually depend on the performance of the company and cash reserves.

There is usually no guarantee that the holders of preferred shares will receive dividends. If they do so, they must be paid at the agreed rate. This payment must be made before any dividend payment to other shareholders. As a result, it is impossible for the company to pay dividends to common shares holders without one of them preference for shares holders.

If the preferred shares are classified as cumulative, then when the company decides to make a dividend payment, the amount it would pay for preferred shares holders is transferred. For example, if the company does not make any dividend payments for two years,Then in the third year, the preferred holder of three years of dividend must pay before anything to pay to the holders of ordinary shares. The alternative to this is known as non -alloying. In this situation, if the company does not pay dividends for one year, the holders of preferred shares will never receive any dividend for the year.