A preferred share is a share in a company with special status (compared to common shares). Typically, preferred shares received a fixed dividend, but have no voting privileges except in extraordinary circumstances. Preferreds rank ahead of common shares (but behind debt-holders) in terms of getting a piece of the asset pie in the event of a company's dissolution. (that's where the "preferred" bit comes in.) Usually the only time when preferred shareholders get voting privileges is when their dividend has not been paid for some specific period of time. Dividends are not required to be paid on preferred shares, but generally companies will pay dividends except in extreme situations - not only may not paying them for long periods mean the shareholders could get voting rights and change management policies, but a history of not paying dividends on preferreds makes a company look very unattractive to investors.

go back to my big ol' finance metanode