What rights do preferred shareholders have?

Preferred shareholders have specific rights that distinguish them from common shareholders, and one of the most prominent rights is the entitlement to fixed dividend payments. This means that preferred shareholders receive dividends at a predetermined rate, which is paid out before any dividends are distributed to common shareholders. This characteristic makes preferred shares somewhat similar to bonds, as they provide a more stable income stream and a higher priority in the capital structure of a company.

This fixed dividend is crucial for preferred shareholders, as it offers a level of predictability regarding their returns on investment. Preferential treatment in terms of dividends is a significant incentive for investors seeking more stability in their earnings.

While preferred shareholders typically do not possess voting rights in corporate decisions, as is the case with common shareholders, their salary-like dividend payments and seniority in the capital structure make their investment a safer option in uncertain economic times. Furthermore, their preferential treatment during share buybacks is not a defined right; rather, buybacks usually pertain more to the company's overall capital strategy, impacting all shareholders proportionally.