Preferred Stock

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Related to Preferred Stock: Convertible preferred stock

Preferred Stock

Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders.

Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. The earnings of a corporation are applied to this payment before common stockholders receive dividends. If corporate earnings are insufficient for the fixed annual dividend, the preferred stock will absorb the total amount of earnings, and the common stockholders will be precluded from receiving a dividend. When corporate income exceeds the amount that is needed to pay preferred stockholders, the remainder is generally paid to common stockholders. In special situations, the remainder may be distributed pro rata to both classes of stock, in which case the preferred stock is said to "participate" with the common stock.

Preferred stock can be cumulative or noncumulative. If it is cumulative and if the fixed dividend remains unpaid, it becomes a debit upon the surplus earnings of succeeding years. Accumulated dividends must be paid in full before common stockholders can receive dividends. When preferred stock is noncumulative, its preference is extinguished by the failure of the corporation to have sufficient earnings to pay the fixed dividend in a given year.

preferred stock

n. a class of shares of stock in a corporation which gives the holders priority in payment of dividends (and distribution of assets in case of dissolution of the corporation) over owners of "common" stock at a fixed rate. While the assurance of first chance at profits is a psychological and real benefit, preferred stock shareholders do not participate in higher dividends if the corporation makes large profits, and usually cannot vote for directors. (See: corporation, stock, common stock)

References in periodicals archive ?
Finally, since Congress intended to require gain recognition only where a taxpayer is exchanging risky instruments for more secure instruments, gain recognition is not required under section 354, 355, or 356 under the following circumstances: (1) certain exchanges of preferred stock for comparable preferred stock of the same or lesser value;(4) (2) an exchange of preferred stock for common stock; and (3) certain exchanges of debt securities for preferred stock of same or lesser value.
None of the newly issued regulations shed any light on some important issues surrounding nonqualified preferred stock and how that stock will be treated by other sections of the Code.
Study legislation to target abusive freeze transactions such as manipulation of investment instruments, lapsing rights, unrealistic buy-sell agreements and valuation of preferred stock upon a subsequent gift of the preferred stock, or death of the preferred stockholder, inconsistent with the valuation of the preferred stock at the time of the freeze.
3689 per share representing the dividend payment originally due November 15, 2006, was declared on the outstanding Series C Preferred Stock, payable February 15, 2007, to shareholders of record at the close of business on February 5, 2007.
AXA acquired Equitable's Series A Convertible Preferred Stock and Series B Preferred Stock, along with common stock, at the time of Equitable's demutualization and initial public offering in 1992.
The employer may redeem the preferred stock with cash or common stock at a price equal to the initial value of the preferred stock.
The company may, in the future, purchase additional shares of its preferred stock, although the company and its affiliates are prohibited from purchasing shares until at least ten business days after December 19, 2006.
If a conversion of Preferred Stock occurs on or before the Redemption Date and, should the Merger be consummated, each share of Common Stock issued upon such conversion and outstanding immediately prior to the consummation of the Merger will be entitled to receive the per share consideration to be issued to holders of shares of Glenborough Common Stock in connection with the Merger.
The general expectation of stable dividends for a preferred stock or comparable hybrid means that the volatility should be much lower than that of common stock, except in the circumstance when the issuer approaches insolvency.
The Board of Directors believes it is in the best interests of all stockholders for the Company to have the flexibility to use either Common Stock or cash to pay Preferred Stock dividends and to redeem the Preferred Stock," said Joseph W.
All shares of Series A Preferred Stock not converted into shares of Patapsco Bancorp, Inc.

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