Glossary · from the DESK dictionary
Preferred Stock
A class of stock with a preferential dividend claim, usually without voting rights.
In plain words
A hybrid between a stock and a bond — usually a fixed, preferential dividend but no vote.
In more detail
Preferred stock grants priority in profit distribution — usually a fixed or minimum dividend — and regularly in liquidation too, customarily in exchange for waiving voting rights. Economically it sits between equity and debt: it pays like a bond but ranks like equity. Its price therefore reacts more to interest rate changes than common shares do. In Germany the voting right revives if the preferred dividend is missed two years running.
Example
A company skips the dividend two years running. Preferred holders thereby gain votes and hold 22 percent at the next general meeting — the family majority is suddenly no longer safe.
What it means for traders
An important corporate financing tool, relevant to income-focused investors.
Common pitfalls
Lower liquidity than common stock and usually no participation in outsized share-price gains.
Related terms
Adjustable-Rate Preferred Stock · Types of Shares · Common Stock · Convertible Preferred Stock · Cumulative Preferred Stock · Dividend · Hybrid Preferred Stock · Hybrid Security · Cumulative Dividend · Preferred Dividend
From the DESK dictionary. For information only, not investment advice.
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DESK is a research tool and not investment advice. Page generated: 2026-10-12.