Same as with common stock, preferred stock represents some degree of ownership in a company but typically doesn't come with the same voting rights. With preferred stock investors are usually guaranteed a fixed dividend forever. This is different than common stock, which has variable dividends that are affected by the market and never guaranteed. Due to this nature of the preferred stock, some people consider preferred stock to be more like debt than equity.

Another benefit of investing into preferred stock is that in the event of liquidation preferred shareholders are paid off before the common shareholder. This means that when the company must liquidates and pays all the creditors, common stockholders will not receive any money until after the preferred shareholders are paid out. Preferred stock may also be callable, meaning that the company has the option to buy back the shares from shareholders at anytime for any reason. Investing into this type of stock gives investor a greater claim to a company's assets and earnings. Thus, if the company has excess cash and decides to distribute money (dividends) to its investors, the owner of the preferred stock can benefectly.

In addition, the dividends paid from investing in preferred stocks are of a different type and generally considered a greater investment than that of common stock. When investing your money into preferred stock, you will know when to expect the dividends that are paid in regular frequencies. In the case for common stock, it is the company's board of directors that will decide whether or not to pay out a dividend on a stock. Because of this characteristic, these stocks typically don't fluctuate as often as a company's common stock and it is sometimes called a fixed income security. Another feature of this fixed income character is the fact that the dividends are generally ensured, meaning that if the company misses a payment, it will be required to pay it before any future dividends are paid on any stock.