Daily Gains Letter

Preferred Shares

Preferred shares are a form of equity – ownership in the company, which provide the same benefit as fixed-income securities. In other words, when you own preferred shares, you own a piece of company; in return, you get a constant stream of income – dividends.

Comparing preferred shares to the common shares, if a company ever runs out of business, preferred shareholders are the second in line after creditors to get the proceeds from the sale of assets. The condition associated with preferred shares may differ from company to company, but preferred shareholders usually don’t have much say in the company matter – in other words, they don’t have voting rights.