First, preferred stockholders have a higher claim to a company’s assets and earnings. When a company has excess cash and distributes the cash as dividends, preferred stockholders are paid before common stockholders. When a company becomes insolvent and must liquidate assets, preferred stockholders receive money before common stockholders. Second, the dividends from preferred stocks are paid at regular intervals, similar to a fixed-income security whose payments do not fluctuate. Dividends from common stocks are paid when the Board of Directors says so. Preferred stock dividends are typically guaranteed. If a company skips a dividend payment, it must make it up before any additional dividends on preferred or common shares are paid. Think of preferred stock as a security whose characteristics lie between a bond and common stock.