A dividend which the shareholder is entitled to receive ahead of the payment of dividends on other classes of shares (usually the ordinary shares). The dividend is usually a fixed percentage of the nominal value (and any premium) paid up on the shares.

A share that confers a preferential dividend on the holder when compared with other classes of shares is typically known as a preference share. For information on preference shares, including the reasons for issuing preference shares and the rights attaching to them, see Practice note, Preference shares.