-
7/25/2019 common stock vs preferred stock
1/4
Common stock
Common stock possesses the traditional right of
ownership voting right, participation in dividends, and a
residual claim to assets in the event of liquidation.
Preferred stock
Preferred stock generally has a dividend that must be
paid out before dividends to common stockholders and
the shares usually do not have voting rights is called
preferred stock.
Dierence
Function
Voting right
Redemption
Face value
Convertibility
Cumulative dividend rights
Dividend
1!unction"
-
7/25/2019 common stock vs preferred stock
2/4
Preferred stock is designed to function primarily as
a #$ed%income security.
&hereas common stock is usually considered to be
a vehicle for long%term growth that often does notdeliver a
regular income stream.
'(oting )ights"
Common stock holders have a right of voting on
corporate policy.
*ue to their preferential treatment they do not
have the voting rights that come with common
stock.
-
7/25/2019 common stock vs preferred stock
3/4
+*ividend
Common stockholder usually receive their dividend
after preferred shareholder.
Preferred shareholders also usually receive their
dividends before anything is paid to common
shareholders.
Cumulative *ividend )ights"
Common stock do not have cumulated dividend
rights
-he dividend preference carried by most preferred
stocks is a cumulative one.
Convertibility"
Common stock is not convertible into debentures.
-he preferred stock may be convertible into share
/!ace (alue
-he face value of common stock shares is usually low
than preferred share.
-he face value of preferred share is usually higher.
0)edemption
-he common share not redeemable during the
lifetime.
-
7/25/2019 common stock vs preferred stock
4/4
-he preferred share is redeemable stockholder
demand.
