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Author: TMFSelena Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2203  
Subject: Re: common stock Date: 5/18/1999 11:58 AM
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<<I found in my files a certificate for shares of 'common stock'. Exactly what does common stock mean, and how does it differ from preferred stock? How would I look up the value of common stock?>>

Common stock represents shares of ownership in a company. It's the regular, plain vanilla form of stock. In addition to common stock, some companies issue "preferred stock" and other items. Below is an explanation of preferred stock that I prepared for our weekly newspaper feature (more on that at: http://www.fool.com/Specials/1999/sp990409Newsprint.htm)

Selena

Q. What's preferred stock? -- O. F., Kansas City, Mo.

We generally avoid investing in preferred stocks, but we're happy to explain them. Like common stock, a share of preferred stock confers partial ownership of a company to its holder. But unlike common stock, holders of preferred stock usually have no voting privileges. Shares of preferred stock often pay a guaranteed fixed dividend that is higher than the common stock dividend.

Preferred stock isn't really for individual investors, though. The shares are usually purchased by other corporations, which are attracted by the dividends that give them income taxed at a lower rate. Corporations also like the fact that preferred stockholders' claims on company earnings and assets have a higher priority than that of common stockholders. Imagine that the One-Legged Chair Co. (ticker: WOOPS) goes out of business. Many people or firms with claims on the company will want their due. Creditors will be paid before preferred stockholders, but preferred stockholders have a higher priority than common stockholders.
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