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A type of stock that pays little or no dividends because the firm is retaining its earnings for future investment in the company. Mature firms

A type of stock that pays little or no dividends because the firm is retaining its earnings for future investment in the company. Mature firms that have stable earnings and little growth opportunity tend to pay large, relatively consistent dividends each year. Consequently, their stock tends to be classified as this type of stock. This protects common stockholders from the management team of a firm issuing a large number of additional shares and purchasing these shares themselves in an attempt to gain greater control over the company. This is an instrument used to transfer the voting rights of a shareholder to a second party

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