A dividend preference for preferred stock means that:
A)Preferred stockholders are allocated their dividends before dividends are allocated to common shareholders.
B)Preferred shareholders are guaranteed dividends.
C)Dividends are paid quarterly.
D)Preferred stockholders prefer dividends more than common stockholders.
E)Dividends must be declared on preferred stock.

Question

Quizplus · Accepted Answer

A dividend preference for preferred stock means that preferred stockholders receive their dividends before common shareholders. This is a common feature of preferred stock and is one of the main reasons why investors may choose to purchase preferred stock instead of common stock. However, it does not guarantee that preferred shareholders will receive dividends, as dividend payments are at the discretion of the company's board of directors.

A Dividend Preference for Preferred Stock Means That