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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.
1. uncountable noun. Common stock refers to the shares in a company that are owned by people who have a right to vote at the company's meetings and to receive part of the company's profits after the holders of preferred stock have been paid. The company priced its offering of 2.7 million shares of common stock at 20 cents a share. The banking concern said that under the plan, shareholders will exchange their common stock for an equal number of shares in the new holding company.