In around two minutes you will know what is a Preferred Stock. You will get both professional definition and easy explanation. No intro, no outro, straight to the point.

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Preferred Share is a security, that represents partial ownership of a company.

Just like common shareholders, preferred shareholders are entitled to a part of a company’s earnings.

And if you are not sure what a common share means, feel free to watch my previous video.

One of the differences between preferred shareholders and common shareholders is the priority to claim company's earnings and assets.

Preferred shareholders receive more stable and somewhat guaranteed dividends. For this reason, the return of such shares is usually smaller than the return of common shares. And sometimes preferred shares are treated as fixed income securities.

But in case a company is not able to pay its dividends in full, preferred shareholders are almost guaranteed to still receive the full amount. Common shareholders are the ones whose dividends will be most likely cut.

In case a company goes bankrupt and sells its assets to pay its lenders, preferred shareholders are second in line to receive the payment right after the bondholders and other debt holders.

Common shareholders receive payments last. Assuming there is money still left.

Another difference between preferred shareholders and common shareholders is that preferred shareholders do not have voting rights. Unlike common shareholders, they can’t vote during shareholders meetings, influence the future direction of the company, or appoint board of directors.

But some companies can give their preferred shareholders limited voting rights.

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