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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
Stock that pays fixed dividends and gets paid before common stock if company fails.
Why It Matters
Preferred stock is a hybrid between stocks and bonds. You get steady dividend income (often 5-7%) with priority over common shareholders. But you miss out on most price appreciation if the company grows. It's popular with income-focused investors and retirees who want higher yields than bonds but aren't chasing growth.
Key Points
- Unlike common stock, preferred usually has no voting rights
- If company goes bankrupt, preferred shareholders get paid before common shareholders (but after bondholders)
- Most individual investors access preferred stock through ETFs like PFF or PFFD rather than picking individual issues
Related Terms
Common Questions
Stock that pays fixed dividends and gets paid before common stock if company fails. Preferred stock is a hybrid between stocks and bonds. You get steady dividend income (often 5-7%) with priority over common shareholders.
Preferred stock is a hybrid between stocks and bonds. You get steady dividend income (often 5-7%) with priority over common shareholders. But you miss out on most price appreciation if the company grows. It's popular with income-focused investors and retirees who want higher yields than bonds but aren't chasing growth.
Unlike common stock, preferred usually has no voting rights
If company goes bankrupt, preferred shareholders get paid before common shareholders (but after bondholders)
Most individual investors access preferred stock through ETFs like PFF or PFFD rather than picking individual issues