Preference Shares

Preference Shares - A higher ranked common stock. Usually preference shares do not have voting rights. However, when a company decides to pay out dividend, preference shares are paid before common shareholders are paid. Preference shares are also carrying an option to be changed into common stock. In case when a company faces bankruptcy, holders of preference shares are paid in assets of the company after the debt holders, and before the common share holders. Often preface shares are carrying a par value... the dividend is usually a percentage of this par value, or a fixed value. Often dividend rights are cumulative.