Preference Shares

AAA

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.

VIDEO

Loading the player...
RELATED TERMS
  1. Current Dividend Preference

    A safety feature of preferred shares, whereby holders of such ...
  2. Contingent Shares

    Shares of company stock that are issued only if certain conditions ...
  3. Preference Equity Redemption Cumulative ...

    A convertible preferred stock with an enhanced dividend that ...
  4. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  5. Preferred Dividend

    A dividend that is accrued and paid on a company's preferred ...
  6. Common Stock

    A security that represents ownership in a corporation. Holders ...
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 >>
  4. Are closed end investments actively or passively managed?

    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 >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Related Articles
  1. Investing

    What are Preference Shares?

    Preference shares, also referred to as preferred shares, are equity shares that give the shareholders certain rights ahead of common shareholders. For instance, when the corporation declares ...
  2. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  3. Bonds & Fixed Income

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  4. Mutual Funds & ETFs

    Utility Funds: A Bright Choice In Bear And Bull Markets

    Gas, electric and water companies' non-cyclical nature can power strong gains in any portfolio.
  5. Mutual Funds & ETFs

    Income Funds 101

    Income funds don't have to be bonds, there are plenty to choose from. Read up on the types of income funds and whether they fit your investment needs.
  6. Investing Basics

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  7. Insurance

    Taking The Bite Out Of A Bear Market

    Find out which financial instruments will protect you from bear market volatility.
  8. Fundamental Analysis

    Calculating Basic Earnings Per Share

    Basics earnings per share measures the amount of net income earned per share of outstanding stock.
  9. Investing

    Is There Still Opportunity in Japanese Stocks?

    Japanese stocks’ strong performance has prompted market watchers to question whether there’s still a case for adding exposure to the Land of the Rising Sun
  10. Economics

    Who Are the Baby Boomers?

    Baby boomer is a descriptive term for a person who was born between the years 1946 and 1964.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!