DO CORPORATIONS ISSUE BOTH COMMON STOCK AND PREFERRED STOCK?

A: Some corporations issue both common stock and preferred stock. However, most corporations issue only common stock. In other words, it is necessary that a business corporation issue common stock, but it is optional whether the corporation will decide to also issue preferred stock.

Usually the holders or owners of a corporation’s common stock elect the corporation’s directors, vote on significant matters, and enjoy increases in the value of their shares of common stock when the corporation becomes successful.

On the other hand, the holders of preferred stock usually receive only a fixed dividend, which must be paid before the common stock is paid a dividend. Because of that fixed dividend, the preferred stock will not increase in value as the corporation becomes increasingly successful.