What Does a Share of Stock Represent?

A share of stock represents partial ownership in the particular company or corporation for which shares are issued. Issuing stock is one way a company can grow and increase its earning potential. The stock is firstly sold through an Initial Public Offering (IPO).

Significance

Although a single share of stock represents a very small piece of ownership, as a shareholder you may be entitled to vote on important company matters, and you are entitled to receive dividends (earnings) from the company’s profits. Since a single share represents such a small portion, stocks are typically sold in batches of 100 shares.

Types

Common stock and preferred stock are the two primary types of stocks sold. As a common stockholder, you have a vote in company decisions and you receive dividends, usually quarterly. As a preferred stockholder, you have a higher level of ownership but usually cannot vote, although you do receive minimum dividends (received before common stockholders) or sometimes guaranteed dividends.

 

Dividends

Generally, the board of directors of a corporation determines the percentage of profits that are distributed as dividends. Dividends may either be paid in cash or as additional shares for reinvestment into the company.