SIE (Securities Industry Essentials) Practice Exam

Which of the following is NOT a benefit of common stock?

1. Voting rights

2. Capital appreciation

3. Dividend Preference

4. Limited liability

The correct answer is: Dividend Preference

Common stock differs from preferred stock in that it does not have dividend preference, which allows preferred stockholders to receive dividends before common stockholders. This means that common stockholders may not receive dividends if the company does not have enough earnings to pay dividends to all shareholders. However, common stock does offer other benefits such as voting rights, potential for capital appreciation, and limited liability for shareholders. It is important to note that while common stock may not have dividend preference, it still has the potential to pay dividends if the company chooses to do so.