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Cash dividends are profits paid to shareholders. Dividends on common stock are optional, but they are required for preferred stock. If a company issues additional dividend-paying common stock, it must either cut the dividend per share or increase the draw from retained earnings.Companies generally canât cut preferred stock dividends, so issuing new preferred stock will cause retained earnings to fall.Even though retained earnings decrease because of additional dividends, stockholdersâ equity might increase because the company raises cash when it issues new shares.t includes accounts for equity -- common and preferred stock -- and retained earnings, the accumulated profits of the corporation. The accounting equation requires that stockholders' equity be equal to assets minus liabilities.
Companies offer two main types of stock: common and preferred stock, each with its share of advantages and disadvantages for investors. All stock is not created equal. Companies offer two main types of stock: common and preferred stock, each with its share of advantages and disadvantages for investors. Common stock versus preferred stock. Common stock and preferred stock both represent some degree of ownership of a company. Holding shares of common stock gives you the opportunity to vote in the election of the board of directors. This is usually equivalent to one vote per share that you own.