Final answer:
Common stock is the type of stock where shareholders are paid dividends after preferred stockholders. Common stockholders have a claim on a corporation's profits, but dividends are dependent on company profitability and board decisions.
Step-by-step explanation:
The type of stock whose owners are paid dividends only after owners of preferred stock have been paid is known as common stock. Common stock shareholders are essentially the owners of a corporation and have a claim on a portion of its profits, which are distributed as dividends. However, dividends are not guaranteed and can fluctuate based on the company's profitability and decisions made by the firm's management or board of directors.
When a corporation earns profits, those profits can be re-invested into the business or paid out to shareholders as dividends. Owners of preferred stock have priority over common stock owners when it comes to dividend payments, meaning that they receive dividends first and sometimes at a fixed rate. Only after meeting the dividend obligations to preferred shareholders will a corporation distribute dividends to common stockholders, and this is usually done at the discretion of the board.
Dividends represent a percent of the profits a company decides to return to its shareholders. The actual amount received by a shareholder is proportional to the number of shares they own. For instance, if the dividend is 75 cents per share, a shareholder owning 85 shares would receive $63.75. Companies that provide dividends often attract investors looking for regular income, and these companies tend to be stable and established in their respective markets.