Bankruptpcy Protection

• If a company liquidates or files for bankruptcy protection, the common stockholders are at the back of the line when the assets of the firm are split up and distributed. That means that if you hold the common stock of a company that gets into financial trouble, you could see your entire holding wiped out.
  
  Holders of preferred stock have a bit more protection, and they stand to gain more in the event of a liquidation. That does not mean, of course, that preferred stockholders cannot lose money, just that they have more of a claim on the assets of the company than the common stockholders.
  
  

Voting Rights

• In most cases, owning preferred stock does not entitle you to voting rights at the company's annual meeting. On the other hand, if you own common stock in that company, you do have the right to attend the annual meeting and vote on any issues up for determination. If common stockholders cannot attend the meeting in person, they can vote through the mail or over the Internet, using a proxy statement mailed to their homes. Preferred stockholders do not enjoy these voting rights.
  
  

Safe Income

• Common stockholders can enjoy current income if the stocks they buy pay dividends, but those dividends can be cut or even eliminated by the board of directors. Owners of preferred shares have more protection of their dividends, and many preferred stocks carry a guaranteed rate of income. That guaranteed income makes preferred stocks an excellent income source for many retirees and others living off their investments.
  
  

Growth Potential

• Preferred stocks generally have a lower growth potential than do common shares of the same company. That makes preferred shares a good choice for investors who need to receive current income from their portfolios and are willing to give up some growth. For instance, those in retirement may be less interested in growing their portfolio and more interested in preserving the purchasing power of their money. Preferred stocks can provide a steady, reliable and reasonably safe stream of income for those investors. On the other hand, investors who are still accumulating a nest egg for retirement might prefer common stock, with its higher growth potential, over slower-growing preferred shares.