Investing in Stocks

Chapter: 5 Investing in Stocks

Section: 3 Common and Preferred Shares

As discussed before, an ordinary shareholder is the true owner of the company and has ownership rights. Preference shares carry the features of both ordinary share and interest bearing debt. Preference shareholders are entitled to a fixed percentage dividend before any dividend is paid to the ordinary shareholders. As with ordinary shares, preference share dividend can only be paid if sufficient distributable profits are available. However, Cumulative Preference Shares have the right to carry forward the unpaid dividend to later years. Preference shareholders are not considered as the owners of the company and do not have the right to vote or to appoint directors.

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