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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