Types of stocks
There are basically two types of stocks:
Common Stocks: Common stockholders are entitled to vote at the shareholder meeting and are eligible to receive the dividends that are paid out by the corporations. Common stocks are ownership of equity shares and provide higher rates of return in a long run. However, they are the last ones to get paid when the company is liquidated.
Preferred stocks: Preferred stockholder have a higher right to the company dividends but they don’t have a say in the shareholders’ meetings. In case of liquidation, preferred shareholders are paid before common stockholders.
A company can issue new shares or buy back the existing ones as per the requirement. In case of issuing new shares, dilution of share occurs and price of the share falls down. However, in case of buy-back, shareholders benefit from the value appreciation.