Check Point Stocks XACC/291 Preferred Stock is referred to as preferred due to owners of preferred stock have preferential treatment over the owners of common stock. When it comes to dividends and liquidation preferred stockholders receive their dividends before common stockholders receive theirs. If the corporation does not declare and pay the dividends to preferred stock, there cannot be a dividend on the common stock. In return for these preferences, the preferred stockholders usually give up the right to share in the corporation's earnings that are in excess of their dividends. There are a total of three features that make preferred stock attractive to investors which are as follows: The feature convertible gives investors the option to convert their preferred stock into a pre-determined number of shares of the company's common stock at some point in the future. The conversion feature is initially set at a conversion rate that is not attractive to investors at the point of purchase. However, if the price of the common stock increases, then investors can convert to common stock, and may then sell the stock to realize an immediate gain. The cumulative guarantees preferred stockholders their money. If the company is unable to pay dividends to its preferred shareholders, then these dividends are said to be "in arrears," and the cumulative feature forces the company to pay them the full amount of all unpaid dividends before it can pay dividends to its common shareholders. This is a common feature of preferred stock. Then last there is the participative feature which allows investor the ability to participate in whatever additional company earnings are left after their preferred dividends have been paid. This feature can cut deeply into the earnings available to common stockholders, and so is opposed by them. This feature