Are You Common?

No, I am not asking if you are average. Statistically speaking most of us are average, but as a stockholder it is important to know if you hold common stock or preferred stock. Why? Because it can mean more money if you hold preferred stock, and frankly I like money. First off what is preferred stock? Preferred stock is a designation that states that the shareholder is to be paid at a different amount/time than a common shareholder. Specifically this is advantageous in a bankruptcy were the preferred share holders are paid after the debt holders but before the common share holders. Additionally, the company may negotiate the share directly with the individual and set a dividend rate that is high than that of common shares. Moreover there are different types of preferred stock such as Cumulative preferred stock, which states that if the dividend is not paid it will accumulate for future payment. Or participating preferred stock, which allows for dividends above the negotiatd amount under certain conditions. A rare form of stock is actually the putable preferred stock, which allows the holder upon certain conditions to force the issuer to redeem the shares. Some preferred stock can be multiple variations of the above and can even be converted into anther form of security or stock under certain conditions. So why doesn't everyone buy preferred shares? Well in the United States publicly traded preferred stocks are mostly limited to financial institutions, and Public utilities. And preferred shares don't usually have voting rights, which is why there is a class designated as "Special Voting Preferred Stock", that has certain limitations. Plus as many bankruptcies have come to light in recent news how much money makes it past the creditors? If the corporation had money to pay the preferred stock then they probably would not be filing for bankruptcy. Additionally, common stock is said to perform better than preferred stock. Remember shareholders are granted certain privileges such as voting, dividends, and access to financial documents. The amount of shares owned normally translates into how many votes you may have in elections such as the board of directors. So one hundred shares in a local small corporation may be the controlling interest, but wouldn't even be a minority vote in Wal*Mart.