A preferred share is a class of equity in a company which entitles the holder to a fixed dividend, whose payment takes priority over that of ordinary share dividends. In most cases, preferred shares are callable, which gives the issuer the right to buy them back and redeem them at a redemption rate, after a certain date.
Hybrid Security
Preferred stock is often categorized as a hybrid security as it has bond-like characteristics due to its fixed dividend payments and therefore their valuations are affected by interest rates in a similar way as bonds.
Conversion Rights
In many cases, preferred shares can also be converted into common equity, usually by pegging the exchange rate to a ratio of common shares for each preferred share.