That part of the capitalization of a company upon which dividends may be paid only after satisfying the requirements of the floating debt, bonds, and " preferred stock," if any. It represents the speculative ownership in a corporation, as a rule. At times, however, the earnings of the companies are so large that the " common stock " receives much larger dividends than the preferred, and sells at much higher prices. When the earnings of a company very largely increase or there are indications of some profitable " deal," the "common stock " is apt to reflect it by a rise in price greater than the other securities of the same company.
In some corporations after the "common stock" has received a certain rate of dividend, there is a division of all other earnings between the preferred and "common stocks," or some other similar plan is adopted. This goes to show that a "common stock " is not necessarily entitled to all earnings after payment of the preferred dividend.
There are many " common stocks," paying no dividends, which sell at seemingly unreasonably high prices. This, among other reasons, is because it is expected that dividends will sooner or later be paid, or that the stock may some time be bought for the purpose of control, and, consequently, is valuable on account of its voting power.
Although "common stocks" usually carry with them voting power, yet there are examples of corporations where the control goes to the preferred holders, although representing a par value far less in amount than the common.
A "common stock " which has a "cumulative" preferred stock preceding it, is not so valuable from a dividend standpoint as if the preferred is "non-cumulative " (see the subjects in quotations), for unless the earnings of a company are so large as to make dividends upon both classes of stock almost assured, the "cumulative" feature may, at some future time, act to the detriment of the common.