Common Stocks

What is a Common Stock

Common Stock: These type of stocks often give the owner the ability to vote at shareholder meetings and vote in electing members of the board of directors. It also many times allow the owner to receive dividends, a payment from the company to shareholders. The holders of this type of security are at the bottom of the priority structure for ownership. For example, if a liquidation happens; these type of stock shareholders have rights to assets only after the bondholders, preferred stockholders, and other types of debt holders are fully-paid.

Analyzing Common Stock

The very first common stock was established in 1602 by the Dutch East India Company. It was introduced on the Amsterdam Stock Exchange.

Now, if a company goes bankrupt, the common stockholders only receive their share of the remaining assets until the preferred shareholders and creditors have received their respective share of the assets that are leftover. This what makes common stock riskier than debt or preferred shares. The advantage to common shares is they usually outperform bonds and preferred shares in the long run.

 

 

 

About Nick

Nick is an author at holdencasey.com. He writes for all categories, but his specialty is defense and law. He normally writes from an unbiased viewpoint, but is known to provide a conservative opinion.
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