Preference shares, also known as preferred shares or simply "prefs," are a type of ownership in a company that combines characteristics of both common stock and bonds. These shares offer certain preferences or advantages to shareholders over common stockholders, but they typically lack the same voting rights.

Preference shares often come with fixed dividends that are paid out before any dividends are distributed to common shareholders. This makes them more akin to bonds, providing a predictable income stream for investors. In cases where the company faces financial difficulty, preference shareholders are usually entitled to receive their unpaid dividends before common shareholders.

However, preference shareholders usually do not have the same voting power as common shareholders when it comes to company decisions and board elections. This trade-off between enhanced dividends and limited voting rights is a defining feature of preference shares.

There are different types of preference shares, including cumulative preference shares (unpaid dividends accumulate and must be paid before common dividends), non-cumulative preference shares (unpaid dividends are not carried forward), convertible preference shares (can be converted into common shares), and redeemable preference shares (can be redeemed by the company after a certain period).

Preference shares are often attractive to income-oriented investors seeking a steady stream of dividends with a degree of safety. Companies may issue preference shares to raise capital without diluting the ownership control of existing common shareholders. Overall, preference shares offer a unique investment opportunity that balances dividends with limited influence over company decisions.