Types of Stocks in the Stock Market According to Rights

Stocks are classified according to types and classes, depending on the characteristics and earnings potential.

According to RIGHTS

a.  Common stock – It is a security usually purchased for participation in the profits and control of   ownership and management of the company. A common stockholder exercises control through voting rights during annual or special stockholders’ meetings, but can only claim rights to the company’s assets and earnings when preferred shareholders are already paid in full.

Most of the issues traded in the local stock market are common stocks.

Common stocks are also known as “ordinary shares.”

b.  Preferred stock – It is a security whereby the holder has a higher claim on the assets and earnings of the company.

In terms of dividend payment and liquidation, preferred shareholders have priority over common shareholders. Though preferred stockholders do not have voting rights, they are entitled to receive dividends before any dividends are paid to the common stockholders.

Preferred stocks usually have a specified limited rate of return or dividend and a specified limited redemption and liquidation price.

Preferred stocks are also known as “preference shares.”

Source:pseacademy.com.ph

As the name itself says, preferred stockholders are given priority as to dividend payments and the first to be paid in full in cases of company liquidation. While common stockholders will enjoy dividends and full settlement in cases of liquidation after the preferred stockholders get their share.

Photo Credits:
http://0.tqn.com/d/beginnersinvest/1/0/O/L/shares-of-preferred-stock-investing.jpg
http://www.financialsaint.com/userfile/54321631commonstock.jpg