In contrast to common stocks, preferred stocks pay a fixed dividend every year. Preferred stock prices are less volatile than common stock prices, but common stock receives priority when the company has surplus money to distribute.

When a company is liquidated, its creditors, bondholders, and debenture holders take precedence over preferred shareholders. Common stockholders have voting rights, which preferred stockholders do not.

Preferred and common stocks are two primary types of equity securities that represent ownership in a company, granting investors certain rights and claims on the company's assets and earnings.

Common stock is the most prevalent type of stock and represents a share in the ownership of a company. Common shareholders typically have voting rights at annual meetings and may receive dividends if the company distributes profits. However, in the event of liquidation or bankruptcy, common stockholders are at the bottom of the priority ladder for claiming assets, making them more susceptible to losses.

On the other hand, preferred stock combines characteristics of both stocks and bonds. Preferred shareholders have a higher claim on the company's assets and earnings than common stockholders, and they often receive fixed dividends. However, preferred shareholders usually don't have voting rights. In the event of liquidation, preferred stockholders are in a better position than common stockholders but still rank below bondholders.

Investors often choose between preferred and common stocks based on their risk tolerance and investment goals. Common stocks offer potential for higher returns but come with greater volatility, while preferred stocks provide more stability through fixed dividends and a higher claim on assets but with limited growth potential. The choice between preferred and common stocks depends on an investor's individual preferences and financial objectives.