Common Stock

Common stock is what most people mean when they talk about buying stocks. Owners of common stock typically get to vote on important company matters, such as electing the board of directors, and they share in the company's success through rising share prices and any dividends the board decides to pay.

The trade-off is priority. If a company goes bankrupt, creditors, bondholders and preferred shareholders are paid first. Common shareholders receive whatever is left, which is often nothing. That is why common stock carries more risk but also offers the most upside when a business does well.

Some companies issue more than one class of common stock, for example Class A and Class B shares with different voting power. This lets founders keep control even after selling much of the company to the public.

Example: a shareholder with 100 common shares in a company that pays a $0.50 quarterly dividend receives $50 each quarter, and also gets 100 votes at the annual meeting if each share carries one vote.