Prior Preferred Stock

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DEFINITION of 'Prior Preferred Stock'

A type of preferred stock with a higher claim on assets and dividends than other issues of preferred stock. If a firm did not generate enough money to fulfill all of its dividend schedule requirements, those holding prior preferred stocks have first priority.

INVESTOPEDIA EXPLAINS 'Prior Preferred Stock'

Since prior preferred stock holders have a higher claim on the dividends of a company during normal operations and a higher claim on assets during bankruptcy, these shareholders are subject to less risk than other preferred or common shareholders. As with many other lower risk investments, these stocks normally offer a lower rate of return relative to other forms of stock because they are subject to less risk.

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RELATED FAQS
  1. Can preferred stocks be traded like common stocks? Are their prices the same?

    First, let's look at the differences and similarities between common stocks and preferred stocks. Both represent a piece ... Read Full Answer >>
  2. Is preferred stock an equity or a fixed-income security?

    Preferred stock is equity. Preferred stock also (usually) has a fixed dividend payout. This is why some investors have referred ... Read Full Answer >>
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