Common Stock Features

Preferred stockholders receive preference over common stockholders when having to pay dividends and assets in liquidation. However, common stockholders are the corps residual owners because they have the right to vote and bear the highest risks associated to ownership.

During bankruptcy, common stockholders are the last (after bondholders and preferred stockholders) for claims on assets. Stockholders liability is limited to the amount of their investments. In reference to profits, common stockholders have the right to receive dividends only after every obligation the corporation has, has been dealt with.

You can benefit in three ways from investing in stocks:

• They allow you to purchase a store of value
• They provide capital growth
• They supply a stream of income (only for dividend paying stocks)

When a new company is formed, common stocks are sold to shareholders to raise funds for the same. Equally, when companies are in need of additional funds to expand, generally sell an additional amount of common stock. Bonds are also sold to raise funds.

Investors invest in companies’ common stocks to earn a return over their money.

Ownership of common stock is evidenced by stock certificates. The front of a certificate shows the name of the issuing company, the name of the owner of the shares, the number of shares of ownership, the identifying serial number, the name of the register, and the par value of the stock.

The back of the stock certificate normally includes an assignment statement which must be signed by the stock holder when the holder transfers ownership of the shares.

Beginner Money Investing Common Stock and Preferred Stock Features of Common Stocks