Preferred Dividend Law and Legal Definition

Preferred dividend is a dividend declared and paid on preferred stock or to holders of preferred shares of stock. It is paid to preferred shareholders who are generally paid a fixed amount and who take priority over common shareholders.

Preferred dividend is payable by virtue of contract to one class of stockholders in priority to that to be paid to another class. In the event that a company is unable to pay all dividends, claims to preferred dividends take precedence over claims to dividends that are paid on common shares.