preference stock: meaning, definition, pronunciation and examples
C1Formal, Technical
Quick answer
What does “preference stock” mean?
A class of company shares that entitle holders to receive dividend payments before common stockholders, typically with a fixed dividend rate.
Audio
Pronunciation
Definition
Meaning and Definition
A class of company shares that entitle holders to receive dividend payments before common stockholders, typically with a fixed dividend rate.
A type of equity security that combines features of both stocks and bonds, offering priority in dividend payments and often in asset distribution during liquidation, but usually without voting rights.
Dialectal Variation
British vs American Usage
Differences
The term 'preference stock' is standard in British English. In American English, the equivalent term is almost exclusively 'preferred stock'.
Connotations
Identical in both varieties; purely technical with no additional cultural connotations.
Frequency
'Preference stock' is common in UK financial and legal documents. 'Preferred stock' is overwhelmingly more frequent in US contexts.
Grammar
How to Use “preference stock” in a Sentence
[Company] issued preference stock to [investor group].The [dividend] is paid on the preference stock before [common stock].Vocabulary
Collocations
Examples
Examples of “preference stock” in a Sentence
adjective
British English
- The preference-stock dividend was declared.
- They reviewed the preference-stock terms.
American English
- The preferred-stock dividend was declared.
- They reviewed the preferred-stock terms.
Usage
Meaning in Context
Business
The board approved the issuance of £50 million in 5% cumulative preference stock to fund the expansion.
Academic
The study analysed the risk-return profile of preference stock within a mixed-asset portfolio.
Everyday
[Rare in everyday conversation. Might be paraphrased as] 'They own a special type of company share that pays them dividends first.'
Technical
The non-cumulative, non-participating preference stock ranks above common equity but below all creditor claims in the capital structure.
Vocabulary
Synonyms of “preference stock”
Strong
Neutral
Weak
Vocabulary
Antonyms of “preference stock”
Watch out
Common Mistakes When Using “preference stock”
- Using 'preferential stock' (incorrect).
- Assuming it always comes with voting rights (it usually does not).
- Confusing it with a bond (it is equity, not debt).
FAQ
Frequently Asked Questions
Typically, no. Most preference stock is non-voting, though some special issues may include conditional voting rights.
Generally, yes. It is considered less risky because of its dividend priority and often higher claim on assets in liquidation, but it is still riskier than corporate bonds.
It means if a dividend payment is missed, it accumulates as arrears and must be paid to preference stockholders before any dividends can be paid to common stockholders in the future.
There is no financial difference; it is a regional variation in terminology. 'Preference stock' is British English, and 'preferred stock' is American English.
A class of company shares that entitle holders to receive dividend payments before common stockholders, typically with a fixed dividend rate.
Preference stock is usually formal, technical in register.
Preference stock: in British English it is pronounced /ˈpref.ər.əns stɒk/, and in American English it is pronounced /ˈpref.ɚ.əns stɑːk/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “[No common idioms for this technical term]”
Learning
Memory Aids
Mnemonic
Think of a 'preference' as getting to go first in a queue. 'Preference stock' holders get paid their dividends before the common stockholders.
Conceptual Metaphor
INVESTMENT IS A HIERARCHY (Preference stock is higher in the payment hierarchy than common stock).
Practice
Quiz
What is the key characteristic of preference stock?