In Investing, Money

Investing Series: What is the difference between “Preferred” and “Common” Stock or Shares?

This is a part of the Investing Series.

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It is exactly as hierarchical as it sounds: preferred versus common.

Think of gentry from way back when. If you were part of the elite in society, you were preferred.

If you were a peasant working your butt off in the fields under the hot sun for someone else, you were a commoner.

That’s it!

A preferred stockholder is someone who (generally) pays more money for the stock, and gets first dibs on:

  • dividends (also called “preferred dividends” as opposed to “dividends” which are common dividends)
  • getting paid back first (e.g. if the company goes bust, they get their money back before the common stockholders)

They may also get better dividends, and a whole bunch of other neat things, for the privilege of having forked out more money.

SUMMARY

  • Preferred just means they’re first in line if anything happens to get their money back
  • Common Shareholder means you are behind the Preferred Shareholders in line

 


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Sherry of Save. Spend. Splurge.

Am my own Sugar Daddy. Am a millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. I have worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I have 11 side incomes that are on track in 2020 to make me $50K - $75K. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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