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Preferred typically have no voting rights, whereas common stockholders do. Preferred stockholders may have the option to convert shares to common shares but not vice versa. Preferred shares may be callable where the company can demand to repurchase them at par value.
Common stock comes with voting rights and greater fluctuations in share price. Dividends are paid out when the corporation's board of directors declare them.
Class A, common stock: Each share confers one vote and ordinary access to dividends and assets. Class B, preferred stock: Each share confers one vote, but shareholders receive $2 in dividends for every $1 distributed to Class A shareholders. This class of stock has priority distribution for dividends and assets.
Class B shares have voting rights, but often they are less than Class A shares. The voting power of each class is determined by the company and how much voting power they want to give to those outside management.
Common stock isn't just common in name only; this type of stock is the one investors buy most often. It grants shareholders ownership rights and allows them to vote on important decisions such as electing the board of directors. They also get a say in certain policy decisions and management issues.
Most publicly traded companies issue two types of stock: common stock and preferred stock. Common stock typically comes with voting rights, while preferred stock does not.
Investors generally should consider Class A shares (the initial sales charge alternative) if they expect to hold the investment over the long term. Class C shares (the level sales charge alternative) should generally be considered for shorter-term holding periods.
Key Takeaways Class A shares refer to a classification of common stock that was traditionally accompanied by more voting rights than Class B shares. Traditional Class A shares are not sold to the public and also can't be traded by the holders of the shares.