What are Preference Shares?

Preference shares (or preferred shares or preferred stocks) are very different from ordinary shares. They usually carries no voting rights, but have priority over ordinary shares in the payment of dividends.

Preference shares can be further classified into two types: cumulative and non-cumulative. For cumulative preference shares, any dividends that are not settled from previous year will be carried forward to the next period. But for non-cumulative preference shares, any dividends that are not paid previously cannot be carried forward.

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Characteristics of Preferred Stock
It has a fixed rate of dividend, which is specified as a percentage of the nominal value. Also, preference dividends must be paid before ordinary dividends...

Types of Preference Shares
Convertible preference shares are corporate fixed-income securities that the stockholders have the option of converting them into a certain number of ordinary shares...

Advantages and Disadvantages of Preferred Stock
The main advantage is that it raises capital for a company without sacrificing the control of company. It is useful for corporate restructuring/reorganization...

Understand Equity Market - Preferred Stock
Participating preferred stock gives the holders the right to receive a specified dividend plus the right to additional earnings based on certain predetermined condition...