What is a fixed dividend?

A fixed dividend is a constant payment made to preferred shareholders, which means that the amount of the dividend remains the same regardless of the company's profitability or other financial performance metrics. This predictability is one of the key features of preferred shares, distinguishing them from common shares where dividends can vary based on the company's earnings and board decisions.

Preferred shareholders typically receive dividends before any dividends are paid to common shareholders, and these fixed dividends are often expressed as a percentage of the par value of the preferred stock. This guarantees a level of income for preferred shareholders, making it a desirable characteristic especially for those looking for steady returns.

The other response options highlight characteristics of dividends that do not pertain to fixed dividends: fluctuations related to profits, changes by shareholder votes, and payment timing, none of which apply to the nature of fixed dividends.