preferred stock: meaning, definition, pronunciation and examples
B2Formal, Technical
Quick answer
What does “preferred stock” mean?
A class of stock in a corporation that has a higher claim on dividends and assets than common stock.
Audio
Pronunciation
Definition
Meaning and Definition
A class of stock in a corporation that has a higher claim on dividends and assets than common stock.
Equity security that provides shareholders with preferential rights, typically including priority dividend payments and a superior claim on assets in the event of liquidation, but often with limited or no voting rights.
Dialectal Variation
British vs American Usage
Differences
In British English, 'preferred stock' is understood but 'preference shares' is the more common and traditional term.
Connotations
Both terms have identical technical connotations. 'Preferred stock' is the dominant global financial term.
Frequency
In UK financial contexts, 'preference shares' is more frequent; in international and US contexts, 'preferred stock' is universal.
Grammar
How to Use “preferred stock” in a Sentence
[Company] issued preferred stock to [investors].The dividend on the preferred stock is [amount/percentage].Holders of preferred stock have [right/privilege].Vocabulary
Collocations
Examples
Examples of “preferred stock” in a Sentence
verb
British English
- The board preferred to issue bonds rather than equity.
American English
- The company preferred to list on the Nasdaq.
adverb
British English
- The committee would preferrably like to meet next week.
American English
- We'd preferably finish the audit by Friday.
adjective
British English
- She is the preferred candidate for the finance director role.
American English
- Overnight shipping is the preferred delivery method.
Usage
Meaning in Context
Business
The company plans to raise capital by issuing new preferred stock with a 5% dividend rate.
Academic
The study analyzed the risk-return profile of preferred stock compared to corporate bonds.
Everyday
My financial advisor suggested adding some preferred stock to my portfolio for more stable income.
Technical
The indenture specifies that the Series A convertible preferred stock shall be redeemable after five years.
Vocabulary
Synonyms of “preferred stock”
Vocabulary
Antonyms of “preferred stock”
Watch out
Common Mistakes When Using “preferred stock”
- Using 'preferable stock' (incorrect adjective form).
- Saying 'I preferred stock in that company' (confusing the noun with the verb 'prefer' in past tense).
- Omitting the definite article 'the' when referring to a specific issue: 'Holders of the preferred stock...'.
FAQ
Frequently Asked Questions
Typically, no. Preferred stock usually does not carry voting rights, which is a trade-off for the preferential dividend and asset claims.
It has hybrid characteristics. Like a stock, it represents ownership. Like a bond, it often pays fixed, regular dividends and may be callable by the issuer.
If a company misses a dividend payment, it must pay all missed ('cumulated') dividends to cumulative preferred stockholders before paying any dividends to common stockholders.
Yes, essentially. 'Preference shares' is the standard term in UK English, while 'preferred stock' is used in US and international finance. They refer to the same financial instrument.
A class of stock in a corporation that has a higher claim on dividends and assets than common stock.
Preferred stock is usually formal, technical in register.
Preferred stock: in British English it is pronounced /prɪˌfɜːd ˈstɒk/, and in American English it is pronounced /prɪˈfɝːd ˈstɑːk/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “None directly associated.”
Learning
Memory Aids
Mnemonic
Think: PREFERRED stock gets PREFERENCE in payments over common stock.
Conceptual Metaphor
HIERARCHY (Preferred stock is higher in the corporate payment hierarchy than common stock).
Practice
Quiz
What is a key characteristic of preferred stock?