Difference between Common and Preferred stock

One of the main differences between the two is that the holders of the common stock have the ownership privileges like the rights to vote in the board meetings, while the preferred stockholders do not have such a privilege.

Within a company, shareholders can have either common or preferred stock, that make up the company’s securities.They both are the pieces of the company’s ownership and are both tools that investors ask from a company in exchange for their investments.

One of the main differences between the two is that the holders of the common stock have the ownership privileges like the rights to vote in the board meetings, while the preferred stockholders do not have such a privilege.

Below are the details to understand the difference between the two:

  Benefits Common Stock Preferred stock
1 Ownership of Company Yes Yes
2 Voting Rights Yes No
3 Price of Security is based on Earning Earning
4 Dividents Varies Fixed
5 Value if Held to Maturity Varies Full
6 Order Paid if Company Default Third Second

From the above, it can be seen that Preferred stock often have more benefits compared to common stocks which is also why investors are interested more in the preferred stock in a company.

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