Glossary

Preferred stock is a type of equity security that combines features of both common stocks and bonds.

Preferred shareholders receive a fixed dividend payment, usually quarterly, and have priority over ordinary shareholders when it comes to dividend payments and asset distribution in case of a company's liquidation. However, preferred shareholders typically do not have voting rights like common shareholders. Preferred stocks can be callable, convertible, or cumulative, offering different benefits and risks to investors. 💵

For example, a company may issue preferred stocks with a 5% fixed annual dividend. Investors who buy these shares will receive a stable income, regardless of the company's financial performance.

Fun fact: Preferred stock is often referred to as a "hybrid security" because it possesses characteristics of both common stocks (equity ownership) and bonds (fixed income). This unique combination appeals to investors seeking stable income and priority in liquidation but are willing to forgo voting rights. 🤝