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.

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BREAKING DOWN '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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RELATED FAQS
  1. What is the difference between horizontal integration and vertical integration?

    Although holders of preference shares and bonds are both entitled to regular distribution payments, preference shares do ... Read Full Answer >>
  2. What is the difference between preference and ordinary shares?

    Preference shares, also known as preferred shares, have the advantage of a higher priority claim to the assets of a corporation ... Read Full Answer >>
  3. What are the advantages and disadvantages of preference shares?

    Preference shares carry a number of benefits for both companies and investors. The chief benefit for shareholders is that ... Read Full Answer >>
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    Closed-end funds, or CEFs, are actively managed. A CEF issues a predetermined number of shares when it is initially organized. ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
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