What is a characteristic of preferred stock?

Preferred stock is a unique class of equity that has distinct characteristics compared to common stock. One of the defining features is that it pays a set dividend that does not fluctuate. This fixed dividend represents a more stable income stream for investors, as opposed to common stock, where dividends can vary based on the company’s performance and decisions made by its board of directors.

Investors often favor preferred stock for its predictable payout, making it particularly attractive to those seeking steady income, such as retirees or conservative investors. In contrast, other types of stock, such as common stock, are linked to the company's overall performance and do not provide guaranteed dividends, reflecting the underlying reasons why it’s preferred in certain investment strategies.