Common stock is a type of stock which represents ownership in a corporation. Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success through dividends and/or capital appreciation is called common stock.
Preferred stock is a special form of stock having a fixed periodic dividend that must be paid prior to payment of any common stock dividends. Preferred stock, is a hybrid form of financing, sharing some features with debt and some with common equity.
Common Shareholders' Rights and Privileges
1. Ownership in a Portion of the Company
2. The Right to Transfer (sell) Ownership
3. The right to receive dividend payments
4. The power to buy the share / Preemptive Right
5. The right to vote to elect directors
6. Residual ownership
7. Residual claim on income and assets
8. The right to receive a proportionate distribution of assets on corporate liquidation
9. Limited Liability
10. No maturity date
11. Can attend at annual general meeting
Characteristics of Preferred Stock
1. Dividends: Owners of preferred stock receive payment of dividends before the owners of common stock.
2. Fixed dividend payment (similar to bond interest payment)
3. Convertibility: Often, preferred stock can be changed or converted into common stock.
4. Callability: Company can contact the owners of preferred stock and force them to sell it back to the company for either cash or common stock.
5. Bankruptcy: Priority to take…
6. Less Volatility: Preferred stock generally does not move up or down as fast as common stock. This means it is less volatile.
7. No maturity date
8. Do Not Have Voting Rights: Preferred stockholders do not have voting rights (like common stockholders do)