Investing · General financial education

Preferred shares as a concept

Preferred shares are an equity class with different rights than common shares: often priority on dividends, usually with little or no voting power.

In more detail

Priority does not mean 'safe'. The price can move; dividends can stop if the company does not pay. Call and conversion features are set by the terms of each share; as equity, preferred shares rank behind bonds. Finmon recommends no share and no issuer.

Background

Priority, voting power and any call terms sit in that security's document. This sits next to ordinary shares, company size, fees and risk. Finmon recommends no share.

An example

A company pays the agreed preferred dividend before common shareholders receive anything. In this example the preferred share has little voting power.

A common misconception

Preferred shares are always safer and better than common shares.

They have different rights. Risk and terms sit in the document, not in the word 'preferred'.

Source: AktG §§ 139 bis 141 · gesetze-im-internet.de. Last reviewed: 2026-11-09. Editorially reviewed on 2026-11-09. Next review 2027-11-09. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.