Preference shares are another type of equity securities issued by firms that combine the features of common shares as well as debt securities. Just like common shares, they do not mature, and can have features such as call and put options. However, like interest payments in debt securities, holders of preferred shares receive fixed payments in the form of dividends at a pre-set rate. Dividends are also generally higher than the dividends paid to common shareholders. Preference shares do not have voting rights.

The dividend payments to preference shares can be cumulative, non-cumulative, participating, or non-participating.