Question

What are the benefits for corporate holders of preferred stocks versus corporate common stock holders?

Answer 1

Solution:

Benefits for corporate holders of preferred stocks versus corporate common stock holders are as under:

1. Preferred stock is less volatile than common stock.

2. Preferred stockholders generally do not have voting rights, but they have a greater claim to the company’s assets

3. Preferred stockholder's get preference in payment over common stock holders at the time of company's liquidation.

4. Preferred stock shareholders get preference in receiving their dividends over common stockholders.

5. Preferred stockholders get fixed dividend payments over a specific period of time unlike variable dividend payment offered to common stockholders.