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." West's Encyclopedia of American Law. . Encyclopedia.com. (June 21, 2018). http://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/preferred-stock
"Preferred Stock." West's Encyclopedia of American Law. . Retrieved June 21, 2018 from Encyclopedia.com: http://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/preferred-stock
Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).
Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.
Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:
Modern Language Association
The Chicago Manual of Style
American Psychological Association
- Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
- In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.
pre·ferred stock • n. stock that entitles the holder to a fixed dividend, whose payment takes priority over that of common-stock dividends.
"preferred stock." The Oxford Pocket Dictionary of Current English. . Encyclopedia.com. (June 21, 2018). http://www.encyclopedia.com/humanities/dictionaries-thesauruses-pictures-and-press-releases/preferred-stock
"preferred stock." The Oxford Pocket Dictionary of Current English. . Retrieved June 21, 2018 from Encyclopedia.com: http://www.encyclopedia.com/humanities/dictionaries-thesauruses-pictures-and-press-releases/preferred-stock