What is the name of the fixed-income security that must be paid dividends before common stock?

Preferred stock is a type of fixed-income security that has specific rights concerning dividend payments. One of the key characteristics of preferred stock is that it generally has a higher claim on assets and earnings than common stock. This means that before any dividends can be paid to common shareholders, dividends must first be distributed to preferred shareholders. This priority makes preferred stock similar to bonds in terms of fixed income, as it often has a stated dividend rate and is seen as less risky than common stock.

In contrast, common stock is the equity ownership in a company, typically allowing holders to vote on corporate policies but having lower priority in terms of dividend payments and asset claims. Convertible bonds are a type of debt security that can be converted into a predetermined amount of the company’s equity, but they do not have priority over preferred stock in terms of dividends. Corporate bonds are debt instruments issued by corporations to raise capital, and while they have priority over common stock, they do not involve dividends in the same sense that preferred stock does. Preferred stock thus distinctly stands out for its structured priority in dividend distribution.