Friday, November 12, 2010

Common Stocks Versus Preferred Stocks

Common Stocks Versus Preferred Stocks, which one will you preferred? Let's see the different between common stocks and preferred stocks below.

Common Stocks
Common stocks or sometimes called ordinary stocks are the same. If an investor holds a common stock of a company, the investor is owing a share of the company. The investor is then hold the right to vote for board members and other important company management matters. Common stocks investors are entitle to receive dividends declared from company earnings. At the same time, they can also participate in the appreciation of the share values. The common stock dividends declared are never guaranteed and may vary from time to time.

Preferred stocks
Preferential Stocks is sometimes called preferred stocks. A preferred stock investor has some degree of ownership in a company but does not entitle the same voting rights. Preferred stocks investors are guaranteed to receive usually a fixed dividend percentage of the share's par value, before dividends on ordinary stocks are announced. A preferred stockholders advantage is that, if the company goes bankrupt and the company were to liquidate their assets, preferred stockholders rank above common stockholders in the distribution of assets. Another feature that may be unique with preferred stock is that, preferred stocks are convertible to common shares at any time. The disadvantage of preferred stockholders is that, preferred stock may be callable, which meas the company has the right to purchase the shares from shareholders at anytime for any reason, but usually with a premium.

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