Owning stock is the equivalent of owning a piece of a company. Therefore, stockholders may enjoy the benefits of any company holder. These benefits depend on the type of stock owned -- common or preferential -- and benefits may range from voting rights, dividends and other types of payments and the right to financial reports.
Common Stock: Voting Rights
If you own common stock, by definition you are a part-owner of the issuing company. This may include some voting rights. Such voting rights are linked to the number of individual shares earned. For example, if you own shares that amount to 30 percent of the company's shares, your shares can carry 30 percent of the vote. However, it should be noted that one share does not necessarily mean one vote, and voting rights vary by publicly listed company.
Common Stock: Dividends and Payments
Investors that hold common stock may be entitled to a portion of the company's profits if they are positive. As a result, such payments may be variable, as they depend on the firm's performance. In lieu of dividends, some companies may offer their share holders additional stock. Such offers are given to shareholders before they are given to the general public. Furthermore, if the company is liquidated, common stock holders may be entitled to a portion of any remaining assets after any company debts are paid.
Common Stock: Periodic Reports
If you are legally a partial owner of a company, you are entitled to know how your company stands. Unlike privately owned companies, publicly owned companies are bound by the law to supply company information, including its finances, results and compensation for managers. In the United States, such laws are regulated by the Securities and Exchange Commission.
Preferred Stock
Unlike common stock, preferred stock does not carry any voting rights. This is because companies who issue preferred stock are only concerned about raising capital while protecting the interests of company board members. If preferred stock pays dividends, it is typically done by means of a fixed payment instead of a proportion of the company's profits. Some preferred stock, however, can be converted into common stock if the company allows it. If the company becomes bankrupt, preferred stockholders are paid before common stockholders.
