Features of Preference Shares

1. Fixed Rate of Dividend: Preference shareholders get dividends before equity shareholders at a fixed rate.

2. No Security: The preference shareholders do not get any security from the company against their shares. Besides, preference share capital is a part of the owner’s fund capital of the company.

3. Hybrid Security: As preference shares consist of the features of both equity shares and debentures, they are known as Hybrid Securties. Just like equity shares, the preference shareholders get dividends only when the company earns a profit, and just like debentures, preference shareholders get a fixed rate of return.

4. Voting Rights: Under general conditions, the preference shareholders do not have voting rights. However, if the dividends are not paid for two years or more, the preference shareholders get voting rights.

5. Help to Collect Large Amount of Funds: As cautious investors and financial institutions prefer to invest in preference shares of a company, it helps them collect a huge amount of funds. Besides, preference shares attract more public because of their fixed rate of return.

6. No Fixed Liability: Preference shareholders get dividend only when the company earns profit. Therefore, in case of losses, the company is not obliged to pay dividend to the preference shareholders.