Preferred stock
A class of equity with priority over common stock for dividends and liquidation, usually with a fixed dividend and limited voting rights.
Preferred stock sits between debt and common equity in a company's capital structure. Holders receive their stated dividend before common holders are paid, and in liquidation they are paid after creditors but before common holders. Most preferred shares carry little or no voting power. Some can be converted into common stock.
Traders care because preferred dividends reduce the cash left for common shareholders. Cumulative terms mean unpaid dividends build up and must be cleared before common dividends resume. A large preferred stack can sit ahead of common equity in a sale or restructuring.
Worked example (illustrative numbers, not real data): a company issues 100 million dollars of 8 percent preferred stock. It owes 8 million dollars a year in preferred dividends before any common dividend can be paid.