Financial Encyclopedia
Preference shares
Definition
Preferred shares are securities that bring a guaranteed dividend income to the owner of the shares. When a company is liquidated or when interest dividends are transferred, the holders of preferred shares have advantages over the owners of ordinary shares.
Example
As of 09/27/2022, the preference shares of PJSC Tatneft cost 347 rubles, ordinary shares - 355.2 rubles.
The company pays equal dividends on common and preferred shares.
More detailed
Advantages:
1. One of the most significant privileges is receiving stable dividend payments.
2. Low volatility. Stock market fluctuations affect preferred shares to less extent, so they are more stable and suitable for long-term financial investments.
3. Compensation of invested funds in a privileged manner. In the event of an issuer's bankruptcy, holders of preferred securities are entitled to priority payments.
Holders of preferred shares are entitled to fixed dividends. The amount of dividend payments is prescribed in the company's policy in the form of a specific amount, a percentage of net profit or the par value of a share.
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