preference shares
Noun (plural: preference shares) 1. A class of company stock: Preference shares are a type of equity security issued by a company. 2. Priority for dividends: Holders of these shares are entitled to receive dividend payments before any dividends are paid to holders of common stock. 3. Limited voting rights: Typically, holders of preference shares do not have voting rights in company decisions, unlike common shareholders. 4. Priority in liquidation: In the event the company is liquidated, preference shareholders generally have a higher claim on the company's assets than common shareholders, but a lower claim than debt holders.
Preference shares are used as a financial instrument for companies to raise capital and for investors seeking more predictable income than common stock, often with less risk but also less potential for capital growth.
- The company issued preference shares to raise funds without diluting the voting power of existing owners.
- Investors who purchase preference shares are primarily interested in the fixed dividend income.
- Unlike common stockholders, holders of preference shares do not usually vote on corporate matters like electing the board of directors.
- Cumulative Preference Shares: If a company cannot pay a dividend in a given period, the unpaid amount accumulates and must be paid to cumulative preference shareholders before any dividends are paid to common shareholders.
- Participating Preference Shares: These shares may give the holder the right to receive additional dividends beyond the fixed rate if the company achieves certain profit goals, allowing them to "participate" in extra earnings.
- Convertible Preference Shares: These shares can be converted into a predetermined number of common shares at a specified time, offering potential for capital appreciation.
- Preferred Stock (noun): The most common synonym for "preference shares," primarily used in American English.
- Preference Stock (noun): A less common variant with identical meaning.
- Common Shares / Common Stock (noun): The contrasting class of shares that typically carry voting rights but have lower priority for dividends and assets.
- Preferred Stock
- Preferred Shares
- Common Shares
- Common Stock
- Ordinary Shares
- stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights