The certificate may be made out for one share or a number of shares. The owner's name appears on the stock certificate and is recorded on the stock books of the issuing corporation. A company may issue two types of stock, common stock and preferred stock. Preferred stock , as the name implies, gives the owner superior rights on dividend distribution. Dividends must be paid to preferred stockholders before they are paid to common stockholders.
Preferred stock has a fixed rate of return which is established when the stock is issued.
Preferred and common stocks are similar in that their owners are entitled to one vote for each share they own in corporation elections. The vast majority of stocks are common stocks and when people speak of stocks they are usually referring to common stocks. Common stock gives its owners a variable rate of return, depending on how well a company did in a given year. After a corporation has deducted all its expenses, paid its income taxes and preferred dividends the amount left is considered the earnings on the common stock. This amount, when divided by the total number of shares of common stock gives the earnings per share on the common stock.