Investors in a public company, you would usually own common stock. Common stocks could give you dividends, but it’s not guaranteed to give you big profits. Also, the dividend amount you would get isn’t fixed so you’re not sure if you would get the amount you expect.
When it comes to preferred stocks, the dividends are fixed. It means that you can gain high income from the stocks every year. The preferred stockholders stand out in investment, unlike the common stockholders.
Why?
The preferred stock owners expect a large amount of profit since the dividends are fixed. Preferred stock owners are sure about the payment they would get each year. It makes them stand out than the common stock owners when it comes to company earnings.
What about the excess cash from the earnings?
Well, the dividends pay the preferred stock owners first. The common stock owners receive the payment after the preferred stock owners. In the company goes bankrupt, the preferred stock owners receive the liquidation of the assets first then the common stock owners.
A stock provides you with the assurance that your money would grow. It’s wise for most investors to buy stocks from different companies so that their income wouldn’t be affected in case the company closes. If you invest in a single company, you might lose part or your whole stock when the company loses value.
You observe the commissions of on online stock brokers before you buy stocks from them. In this way, you wouldn’t face any hassles in buying the stocks.
Also, you take note of the common and preferred stocks in the company. If you want to stand out in the company, the preferred stocks are an excellent choice for you. Preferred stock owners can expect fixed payments, unlike the common stock owners.
If the company closes, you have big chances to gain high earnings from the liquidation assets of the company. Investors also need to take significant risks if they want to gain big rewards from buying stocks from different companies. Why? In taking risks, they can become successful!