Prior Preferred Stock

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.

BREAKING DOWN '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. What is common stock and preferred stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ... Read Answer >>
  2. What are some examples of preferred stock, and why do companies issue it?

    Understand the difference between preferred stock and common stock, and learn the primary reasons why companies issue preferred ... Read Answer >>
  3. How are preferred stock dividends taxed?

    Discover the intriguing debt and equity characteristics of preferred stock, and learn about how preferred stock dividends ... Read Answer >>
  4. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference shares and why investors might value them more than common ... Read Answer >>
  5. What is the difference between preferred stock and common stock?

    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's ... Read Answer >>
  6. What are the advantages and disadvantages of preference shares?

    Learn about the advantages and disadvantages of preference shares to both investors and issuing companies, including the ... Read Answer >>
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