Preference Shares

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DEFINITION of 'Preference Shares'

Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a company bankruptcy, preferred stock shareholders have a right to be paid company assets first. Preference shares typically pay a fixed dividend, whereas common stocks do not. And unlike common shareholders, preference share shareholders usually do not have voting rights.

Also referred to as preferred stock.

INVESTOPEDIA EXPLAINS 'Preference Shares'

There are four types of preference shares: Cumulative preferred, for which dividends must be paid including skipped dividends; non-cumulative preferred, for which skipped dividends are not included; participating preferred, which give the holder dividends plus extra earnings based on certain conditions; and convertible, which can be exchanged for a specified number of shares of common stock.

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