Preference Share
A share that receives a fixed dividend ahead of equity shares and ranks ahead of them in a winding-up, usually in exchange for giving up voting rights.
Formula
Annual preference dividend = Face Value x Coupon Rate x Number of Preference Shares
Unit
₹
In depth
A preference share sits between debt and equity: it behaves like a bond in that the payout is fixed and prior-ranking, but it is legally share capital, so a missed dividend is not a default. Cumulative preference shares carry unpaid dividends forward and must clear the arrears before equity sees anything; non-cumulative ones do not. The common error is to treat a preference share as safe because it is 'preferred' — it is preferred only relative to equity, and still sits behind every lender.
Worked example
A company has 10,00,000 preference shares of face value ₹100 carrying an 8% coupon. The annual preference dividend is 100 x 8% x 10,00,000 = ₹80,00,000, or ₹80 lakh. That entire amount is settled before a single rupee of equity dividend is declared.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Preference Share” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.