Classes of Stock

While it would probably be simpler if only one kind of stock existed, circumstances rarely cooperate. Though the majority of companies traded on the stock market seem to be content with having nothing but common shares, there are still a number of companies that have other classes of stock.

Common Stock
For most companies, this is the only kind of stock available. And the common rule is one share equals one vote. Depending on the company, there may or may not be a dividend. In the event of corporate liquidation, shareholders are the last to be paid off.

Class A Stock
In companies that have Class A shares, these shares are considered to be senior to all other classes of stock. In many companies these shares may hold as many as 10 votes per share.

Class B Stock
If a company has Class A shares, it will have Class B shares. They typically have one vote per share of ownership, and may not necessarily have the same dividend per share that Class A shares have.

Class C Stock
Rarely found and not particularly popular as they sometimes have no voting rights attached to them.

Preferred Stock
The one kind of stock that may co-exist with common stock. The only thing certain about preferred shares is that you will get a regular dividend. Other than that, Preferred Stock tends to vary from one company to another. Some include a vote, and others do not. Some will be callable after a given date, others aren't. If they are callable, it means that after the call date passes, they can redeem your preferred shares any time they want, whether you like it or not.

The one constant that you can count on, is that all Preferred Shares have a fixed dividend that must be paid on a regular basis. With non-preferred shares dividends are optional. Because the dividend rates of Preferred stocks are fixed, and payout is mandatory, they often behave like mini-bonds and frequently respond more to changes in the interest rate than to events affecting the company.

Another difference is that normally, Preferred Shareholders are paid ahead of the other shareholders in the event the company is liquidated.