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preferred stocka FINANCIAL SECURITY issued to those individuals and institutions who provide long-term finance for JOINT-STOCK COMPANIES. Preference shares pay a fixed rate of DIVIDEND and are generally given priority over ORDINARY SHARES in receiving dividend. In the event of the company being wound up they also have first claim on any remaining ASSETS of the business after all debts have been discharged. Cumulative preference shares are entitled to be paid any arrears of their dividend before ordinary shares receive any dividends.
Certain preference shares, called Participating Preference Shares, entitle holders not only to a fixed dividend rate but also to anadditional distribution of profit in good trading years. Generally, preference SHAREHOLDERS have no voting fights at company ANNUAL GENERAL MEETINGS, though under the terms of a firm's ARTICLES OF ASSOCIATION they may be granted voting rights where their dividends are in arrears. See SHARE CAPITAL.