Which characteristic is associated with preferred stock?

Preferred stock is associated with the characteristic that owners receive dividends before common stockholders. This means that when a company distributes dividends, preferred shareholders are paid first, reflecting their priority in receiving income from the company's profits compared to common shareholders. This feature makes preferred stock an attractive investment for those seeking more reliable income, as preferred dividends are often fixed and must be paid out before any dividends are distributed to common stockholders.

While preferred stock does not come with voting rights in corporate decisions—this is generally reserved for common stockholders—its priority in dividend distributions is a defining and pivotal feature. Additionally, preferred stock typically involves less risk than common stock; thus, the idea that owners of preferred stock have higher risk than common stockholders is inaccurate. The option regarding conversion to bonds is also misleading, as preferred stocks are generally not convertible into bonds; such conversion provisions are rare and not standard for preferred shares.