Which type of stock generally has priority in receiving dividends before common stockholders?

• A. Preferred Stock
• B. Common Stock
• C. Ticker Symbol
• D. Income Statement

Answer: (A)

Dividends are allocated according to the rights attached to each class of stock. Preferred stock generally has priority over common stock for dividend payments, often with a fixed dividend rate. This priority means the company must pay the fixed dividend to preferred shareholders before any dividends can be paid to common shareholders. Some preferreds are cumulative, so any missed payments accumulate and must be paid before common dividends. Common stock represents ownership with a residual claim and typically receives dividends only after preferreds, and may carry voting rights. The ticker symbol is just a stock’s trading code, and the income statement is a financial report, not a type of stock.