Generally, there are two types of shares that a company distributes to its shareholders: preferred and common shares. The type of share determines the buyer's voting rights, dividend yields, and percentage of ownership in the company.
In most cases, preferred shares have the most potential for short-term gains because of the following reasons:
- No voter rights
- Dividends are issued to preferred shareholders first
- Share value is calculated on par (i.e. at face value) and is affected by interest rates
- Shares are callable (i.e. the share issuer has the right to redeem shares from the market after a time)
On the other hand, common shares often have the most potential for long-term gains because of the following reasons:
- Voting rights
- Dividends are issued to shareholders last
- Share value is regulated by market demand and supply
- Shares are not typically callable
In addition to preferred and common shares, a company may refer to its shares with a specific class structure. There are generally three classes (Class A, B, and C) that describe shares with distinct characteristics. For instance, a Class A share may have more voting rights per share than a Class B or C share.
To learn more about a company's share structure, you may consult the company's Articles of Incorporation or the public listing in which the shares are advertised.