Dividends paid to investors who purchase preferred stock are paid before dividends are paid to common stockholders.

Question

Quizplus · Accepted Answer

This is because preferred stock is considered a hybrid security that has both debt-like and equity-like features. One of these debt-like features is the priority in receiving dividend payments. Common stockholders only receive dividends after preferred stockholders have been paid their predetermined dividend rate.

Dividends Paid to Investors Who Purchase Preferred Stock Are Paid