A Preferred stock is a security whereby the holder has a higher claim on the assets and earnings of the company. In terms of dividend payment and liquidation, preferred shareholders have priority over common shareholders and they are entitled to receive dividends before any dividends are paid to the common stockholders. Preferred stocks usually have a specified limited rate of return or dividend and a specified limited redemption and liquidation price. Preferred stocks are also known as “preference shares.” (source: www.pseacademy.com.ph)
Preferred stocks may have different features depending on the issuing company. The most general feature of preferred shares is that it generally has a fixed dividend issued at specific periods, whereas dividends may or may not be issued for common shares which are at the discretion of the issuing company. The main difference between common and preferred shares is that common shares are more liquid, which means that there are more trades for this than the preferred shares resulting to more movements in its market price, while the market price of preferred shares only have slight movements since they are usually purchased for the dividends issued rather than for their trading profitability.