Business and Personal Finance Dictionary

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• PREFERRED STOCK
  
  Some corporations issue preferred as well as common stock. Preferred stocks can be attractive because they pay a fixed dividend on a regular schedule, and their share prices tend to remain stable. They also take precedence over common stocks if the issuing corporation liquidates, or sells, its assets to repay its creditors and investors. What preferred stock doesn't generally offer is the opportunity to share in the corporation's potential for increased profits, which are reflected in higher prices for the common stock and sometimes an increase in its dividend payment. One category of preferred shares, called convertible preferred shares, can be exchanged for a specific number of common shares at an agreed-upon price, similar to the way that a convertible bond can be exchanged for common stock.
  
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