To dividends before the common stockholders are. If the company is liquidated, the preferred

Stock is paid off before the common stock is, but after the bonds are.

Dividends on preferred stock generally are fixed and cumulative. They do not increase if the

Company prospers. They may, however, be reduced or suspended if earnings are poor. If they are

Reduced or suspended, they cumulate and are paid when earnings improve. Most corporations

Arrange for preferred shareholders to get voting rights if dividends on preferred stocks are suspended

For a specified period.

Some preferred stocks are convertible into common stocks. The right to convert is an option for

Investors who prefer to receive a fairly certain income rather than exercise the rights of ownership.

There are some types of bonds that are also classified as convertible securities.

Par value is a term for the face value of a stock as stated on the stock certificate. Par value thus

Represents the assets behind each share at the time of issue. Par value has a direct relation to the

Assets or to the market value of the shares themselves. Some companies issue stock with no stated

Value, called no-par stock. It may be sold at any price, whereas par-value stock cannot initially be

Sold for less than its stated value.

Option trading is one of the more complicated aspects of the stock market. Options are contractual