Preferreds vs. ordinary shares: who wins the dividend race? — InvestReview

However, owners of preferreds lack voting rights. We explore why these shares are becoming the choice for conservative investors and how they differ from ordinary shares.

What are preferred shares?

• Preferred shares ("префы") are privileged shares that give owners an advantage in dividend payments and during company liquidation.
• Owners of preferreds cannot participate in voting at general shareholder meetings.
• Examples of companies with preferred shares include Sberbank, Tatneft, and Rostelecom.

Why do investors choose preferred shares?

• Fixed dividends: owners of preferreds receive a minimum guaranteed payout amount.
• Payment priority: dividends are paid first on preferreds, then on ordinary shares.
• Conversion: some preferreds can be exchanged for ordinary shares.
• Protection in liquidation: in case of bankruptcy, preferred owners receive funds before holders of ordinary shares.

Features of preferred shares

• Preferred shares are less volatile than ordinary shares.
• Ordinary shares are more commonly used for company management and active trading; they are more liquid and subject to significant price fluctuations.
• Preferred shares trade less actively, which reduces their price swings, according to the SberInvestments channel.