Preference Shares

Preference shares are shares which have preferential rights to ordinary shares. In a liquidity event such as bankruptcy, preferential shareholders have a priority over ordinary shareholders. Preference shareholders are also usually paid a fixed dividend. The preference share dividends are paid before ordinary share dividends are paid. This is also the reason why preference shares may trade at a higher price than ordinary shares.

Pays a fixed dividend rate till redemption

Preference shareholders are paid a fixed dividend out of the profits of the company till redemption occurs.

Redeemable at par

Preference shares are redeemable at par either at the discretion of the company or holder.

Read : Ordinary Shares Common Stock