Preferred shares are also referred to as preferred stock and preference shares. Preferred shares carry no voting rights. However, they entitle their holders to priority over common stockholders if a company goes bankrupt. This means that they have the first claim on a company’s assets before common stockholders if they want to recover their investments.

Preferred shares are regarded to be a more stable form of investment than common stocks. Preferred shareholders are guaranteed regular dividends, and have priority over common stockholders when receiving these dividends.