Preferred Shares Explained in E|nglish

 

📘 What is a Preferred Share?

A Preferred Share is a type of share that gives some special rights and benefits compared to common (ordinary) shares. Preferred shareholders get priority in dividend payments and in company assets if the company shuts down.

🔹 Key Features:

• ✅ Priority in dividends: Preferred shareholders receive dividends before common shareholders.
• ✅ Fixed dividend rate: Most preferred shares offer a fixed percentage of dividend every year.
• ✅ Priority in asset distribution: If a company closes, preferred shareholders are paid before others.
• ❌ Limited voting rights: Generally, preferred shareholders don’t have voting rights (or have limited rights) in meetings like the AGM.

🧩 Example:

Let’s say ABC Company issues 1,000 preferred shares with a 10% annual dividend. If you buy one share:

• 🔸 You will likely receive 10% dividend every year (if the company earns profit).
• 🔸 You get dividends before common shareholders.
• 🔸 If the company closes, your money will be returned first from its assets.

📊 Preferred Shares vs Common Shares:

Feature	Preferred Shares	Common Shares
Dividend	Gets paid first	Gets paid later
Voting Rights	Limited or none	Full voting rights
Risk	Lower	Higher
Benefit	Stable income	Growth potential

🔚 Conclusion:

Preferred shares are suitable for investors looking for steady income. They offer fixed dividends, priority in payments, and less risk than common shares.

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