Image Alt Text
funding

What Are Preferred Shares?

Preferred shares, also called preferred stock or preference shares, are a class of stock shares in a corporation that are higher-ranking in the capital structure than common stock. Owners of preferred shares have a higher claim on the company’s earnings and assets. It’s important to keep in mind that preferred shares are lower-ranking in the capital structure than bonds. Preferred shares let a corporation raise capital without any dilution of control through accumulated voting rights. Typically, preferred stock has the following characteristics that common stock does not have:

  • Preference in dividends (meaning that dividends get paid to owners of preferred shares first)
  • Preference in assets (if the company liquidates)
  • An option to convert to common stock (while common stock doesn’t have the option to convert to preferred stock)
  • The ability to be called (that is, redeemed early) by the company
  • Non-voting shares

Due to negotiations, bulk purchases, and tax advantages, institutions are normally the initial buyers of preferred shares, not individual stock owners. Preferred shares come in a variety of types, each with their own unique characteristics. Types of preferred shares include, but are not limited to: prior preferred, preference preferred, cumulative preferred, exchangeable preferred, participating preferred, perpetual preferred, putable preferred, non-cumulative, and supervoting.


Related Articles

Your privacy

We collect data when you use our website to improve its performance. Doing so also helps us provide a secure, personalized experience. Select 'Accept cookies' to agree or 'Cookies settings' to choose which cookies we use. You can change your preferences anytime by clicking the 'Manage cookies' link in the footer.

Choose your cookie preferences

Some cookies are needed to make our website work and can't be turned off. But we need your consent to use others that are not essential. You can make your choices below and update them at any time using the 'Manage Cookies' link. To find out more, visit our Cookies Policy.

These cookies are necessary for the site to function. They also help us keep your data safe.
These cookies allow us to enhance your experience and remember your preferences, region or country, language, and accessibility options.
These cookies tell us how customers use our website. We study and organize this data to help us optimise our content and provide you with personalised experiences.
These cookies help us provide you with relevant communications and ads in our products and on other sites.

Looking for something else?

Get QuickBooks

Smart features made for your business. We've got you covered.

Firm of the Future

Expert advice and resources for today’s accounting professionals.

QuickBooks Support

Get help with QuickBooks. Find articles, video tutorials, and more.