Common shareholders vs. preferred shareholders: Which investment option will you prefer in 2026?

Often, Thai investors face the same problem: they have savings, see a good dividend-paying preferred stock with low leverage, think it’s safe, but when they try to sell, they find “no buyers” or have to sell at a lower price. Meanwhile, patient common shareholders see their investments multiply many times over. Today, we’ll clarify how important the difference between common shares and preferred shares really is, and which one to choose.

Common Shares: The Wealth-Building Weapon, But Must Accept the Risk

Simply put, owning common shares means saying, “I am part owner of this company.” You’re not an employee or a creditor—you’re an “owner” sharing risks and profits with other shareholders.

What’s most attractive is the “Unlimited Upside”: if the company grows, stock prices can soar 10x, 100x, or more, because there’s no cap. Dividends also increase with higher profits. That’s why Warren Buffett loves common stocks—they are the most powerful tool in capitalism for building wealth.

But “the higher the risk, the higher the reward.” Common shareholders are at the “bottom of the capital structure.” If the company goes bankrupt, all debts, creditors, and preferred shareholders are paid first. Any remaining funds go to common shareholders, often zero.

Another key point: voting power. One share = one vote. You can elect directors, influence company direction—real bargaining power.

Preferred Shares: Predictable Cash Flows, But Secondary Priority

Preferred shares are “something” between bonds and common stocks. Legally, you are a “owner,” but practically, you act like a “creditor”—lending money to the company in exchange for steady, reliable cash flows.

Preferred shares have this feature: they always receive dividends before common shareholders, at fixed rates like 5% or 7% per year—similar to bond interest. If the company suffers heavy losses, you get your capital back first. The price of preferred shares doesn’t run wild like unlimited upside stocks; it fluctuates within a narrower range and is relatively “liquid.”

Types of Preferred Shares to Watch Out For: Cumulative, Convertible, Callable

Preferred shares are not all the same; there are many varieties.

Cumulative vs. Non-cumulative: The most critical difference. If a company skips dividends for a year due to losses:

• Cumulative preferred shares “accumulate” unpaid dividends, which must be paid in the future before common dividends.
• Non-cumulative preferred shares do not accumulate unpaid dividends; if skipped, they are lost forever, and you bear that loss.

Convertible: Some companies allow you to convert preferred shares into common shares at a set ratio. If the common stock soars, you can convert to “catch the big fish.”

Callable: The company has the right to buy back your preferred shares after a certain period (e.g., 5 years). Usually, this happens when market interest rates fall, and the company wants to refinance at lower rates, paying back your preferred shares at a premium. You lose the opportunity for high dividends.

Key Differences: 6 Points Investors Must Know

When market interest rates rise, investors tend to flee preferred shares for higher-yield bonds, making preferred stocks fall in value. In high-rate environments, preferred stocks can decline, showing profit on one side and loss on the other.

Why Do Companies Issue Preferred Shares?

Investors often see only their own perspective, but if you wear the company’s management hat, you understand the game better.

First: Maintain Control. Founders wanting funds but not wanting to dilute voting power issue preferred shares, because preferred shareholders have no voting rights, so control remains with founders.

Second: Improve Financial Ratios. Preferred shares are counted as “equity” (not debt), so issuing them improves debt-to-equity ratios, making the company look less leveraged compared to bank loans or bonds.

Third: Flexibility. Bond interest must be paid regardless of profits; default leads to bankruptcy. Dividends on preferred shares can often be deferred if necessary, as they are paid to shareholders, not creditors—so no default.

4 Investor Types and Suitable Options

No stock is the best; only the most suitable for your goals and risk profile.

Type 1: Speculator—Bold, seeking profit from price swings, indifferent to dividends.

• Choose: CFD or leveraged trading on Mitrade.
• Reason: High volatility, ability to short, leverage amplifies gains.

Type 2: Income Seeker—Retirees or those needing steady passive income.

• Choose: Preferred shares (especially liquid ones or global ETFs).
• Reason: Fixed, predictable dividends, akin to savings interest but higher.

Type 3: Long-term Value Investor—Believes in company growth over time.

• Choose: Common stocks of solid companies.
• Reason: Long-term compounding, dividends as bonus, focus on growth.

Type 4: Sophisticated Investor—Experienced, managing a portfolio like a fund.

• Choose: Mix (core holdings in common stocks + hedging with derivatives/CFDs).
• Reason: Growth with risk management, using futures or CFDs on Mitrade.

Lessons from Failures: SCB-P, KTB-P, RABBIT-P

It’s not always pretty when shareholder structures change and liquidity disappears.

SCB-P: Siam Commercial Bank merged with SCBx (tech company). Existing preferred shareholders (SCB-P) were given options to convert to SCBx or not. Those unaware or unwilling saw their shares delisted, becoming “over-the-counter” and very hard to trade.

KTB-P: Despite KTB (common stock) trading hundreds of millions daily, KTB-P (preferred stock) had zero or just a few shares traded daily. Large investors trying to sell face illiquidity or forced sale at deep discounts.

RABBIT-P: Preferred shares of RABBIT (formerly U City) have complex terms: fixed dividends, convertible 1:1 into common shares from 2023, with possible voting rights reduction if dividends are paid fully. Without understanding “Conversion Parity,” investors risk making wrong decisions.

Shared Lesson: Preferred shares may not last forever; liquidity can vanish; shareholder structures can reset after major corporate actions.

Risks When Interest Rates Rise and Liquidity Vanishes

Although preferred shares seem safe, they have two sides.

Liquidity Risk: As seen with KTB-P, difficulty in selling is the biggest risk.

Interest Rate Risk: Prices move inversely to rates. When rates rise, preferred prices fall, as investors shift to higher-yield bonds or deposits.

Call Risk: When rates fall, companies often call back preferred shares and reissue at lower dividends, causing you to miss out on higher yields.

Leverage Risk: Using leverage on Mitrade can amplify gains but also losses; always set stop-loss orders.

Quick Decision: Which Option Is Right for You?

Ultimately, choosing common shares vs. preferred shares isn’t about which is better, but which suits your goals and risk appetite.

If you seek exponential growth amid volatility, common stocks are suitable. If you prefer steady cash flow without constant monitoring, preferred shares (if liquid) are the answer.

The investment universe is broader than you think. Study deeply, verify liquidity, assess interest rate risks, and if you want extra leverage, use tools like CFDs on Mitrade. Wealth will follow.