Sometimes, when the price of a stock gets high, a company will decide to do a stock-split. A stock-split is when the company takes the total number of shares outstanding and doubles the number, dividing each share by two. As a result, the total value of all shares remain the same. Each shareholder then has double the number of shares but for half the price. The reason a Company does a stock split is to increase the number of people who can invest in the company by allowing investors to buy shares at a lower price.
Stocks can split two for one, three for two, five for one, or any other combination.
Common stock, which we described above is the most common form, Preferred stock, and Convertible stock. Preferred stock has a more stable nature. Preferred shareholders get paid out their dividends before Common Stock holders but the upside is limited so if the Company performs better than expected, the preferred shareholders won't benefit from extra money paid out, while Common stockholders will. Plus, the preferred stock increases in value more slowly. Historically, the stock market has provided the largest return.