Preference shares sit between debt and ordinary equity. Holders typically receive a fixed or preferential dividend before ordinary shareholders are paid. In a liquidation they usually rank ahead of ordinary equity but behind lenders. Voting rights are often limited compared with ordinary shares.
Key takeaways
- Preference dividends are usually paid before ordinary dividends.
- Many preference shares have little or no voting power.
- They can be cumulative, redeemable or convertible depending on the terms.
- Read the prospectus carefully; the label alone does not fix the rights.