Which class of stock provides preferred shareholders with preference over common shareholders in terms of dividends?

Preferred stock provides preferred shareholders with a priority claim over common shareholders when it comes to dividends. This means that dividends must be paid on preferred shares before any dividends can be distributed to common shareholders. Preferred stock typically offers fixed dividend rates, which can provide a consistent income stream to investors who hold this type of security. In intervals when the company declares dividends, preferred shareholders receive their payments first, reflecting the preference associated with this class of stock.

Common stock, on the other hand, is what most people think of when they consider stock ownership, but it does not carry the same rights to dividends as preferred stock. Class A stock may refer to a variety of arrangements depending on the company’s structure, but it does not inherently provide preferences regarding dividends. No-par-value stock refers to shares issued without a nominal value and does not relate to the rights regarding dividend distributions. Therefore, in the context of dividend preference, preferred stock distinctly stands out as the correct choice.