Preferred stock

A preferred stock, also known as a preferred share or simply a preferred, is a type of stock. It typically gives the owner the right to collect a fixed dividend from the firm when funds are available for distribution, with higher priority than regular stock owners, hence the 'preferred' name. However, it generally does not give the owners any voting power in the decisions of the firm. In that sense it has a lower ranking than regular stock, and hence is more similar to debt. Also, the dividend owed to preferred shareholders is generally fixed and therefore they do not benefit from large dividend payouts, as regular stockholders do.