Preferred Stock
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Various classes of stock provide variety in the way of investments and how they’re conducted. Preferred stock is a more “upgraded” version of commons stock, with various differences that can make it a sought after preference. Although it can be offered by corporations like common stock, it has priority over common stock in a few different ways. Preferred stock holders have the priority when it comes to receiving dividends over common stock holders (Kimmel, Weygandt, & Kieso, 2011). Priority, in this case means that if a company has the proper finances to pay out dividends, preferred stock holders would receive theirs first. This may be a feature that would be attract more investors rather than common stock. Another attractive feature is explained by Kimmel, Weygandt, & Kieso, (2011) “(The) …“cumulative dividend feature”. This means that preferred stockholders must be paid both current-year dividends and any unpaid prior-year dividends before common stockholders receive dividends. (Chapter 11: Organization, Stock Transactions, Dividends, and Retained Earnings). However, the downside to preferred stock over common stock is there are no voting rights for preferred stock holders. This could be a downside for those that are wanting to have more control over a company and are using that as an investment. However, those investors that are wanted to invest and have increased chances of receiving dividends sooner.
If I were to invest in stock, I would attempt to purchase both kinds of stock: both preferred and common. The reason being that with common stock, I have the opportunity to watch a company grow while voting and having that control over my investment. While preferred stock options could get my dividends