Preference Shares vs Ordinary Shares Singapore
Two Different Ways to Own a Piece of an SGX-Listed Company
Preference shares are a class of shares that typically receive dividends at a fixed rate before ordinary shareholders are paid, but usually without voting rights, while ordinary shares represent standard company ownership with voting rights and variable, non-guaranteed dividends.
Not financial advice. All figures for educational reference only. Last updated: October 2026.
Key Takeaways
- Preference shareholders generally have priority over ordinary shareholders when it comes to receiving dividends and claims on company assets if the company winds up, but typically receive a fixed rather than growing payout.
- Ordinary shareholders usually have voting rights on company matters, while most preference shares carry limited or no voting rights except in specific circumstances.
- Preference share dividends are often cumulative, meaning if a payment is missed in a bad year, the company typically must pay the arrears before any ordinary dividend can be declared.
- Ordinary shares offer unlimited upside potential tied to company growth, while preference shares offer a more bond-like, capped return profile.
- Preference shares are less common and less liquid on SGX than ordinary shares, with fewer counters available for retail investors to trade.
What Are Preference Shares and Ordinary Shares?
Ordinary shares (also called common shares) are the standard form of equity ownership in a company — when people talk about ‘buying a stock’, they almost always mean ordinary shares. Ordinary shareholders typically have voting rights at general meetings, proportional to their shareholding, and are entitled to dividends only after the company decides to declare them, with no fixed amount guaranteed.
Preference shares, by contrast, sit between ordinary equity and debt in a company’s capital structure. Holders are typically entitled to a fixed dividend rate, paid out before any dividend can be paid to ordinary shareholders, and often have priority over ordinary shareholders on the company’s assets if it is wound up. In exchange for this priority and more predictable income, preference shareholders usually give up voting rights and the uncapped upside that comes with ordinary share ownership.
Many preference shares are also ‘cumulative’, meaning if the company skips a dividend payment in a difficult year, the unpaid amount accumulates as an obligation that must be cleared before ordinary shareholders can receive any dividend again — a meaningful protection that ordinary shares simply don’t offer.
How Does It Work in Singapore?
On SGX, preference shares are issued less frequently and trade in smaller volumes than ordinary shares, so retail investors looking specifically for preference share exposure will find a narrower universe of counters compared to the thousands of ordinary-share-listed companies. Some Singapore banks and real estate-related companies have historically issued preference shares, often as a way to raise capital that sits between equity and debt on the balance sheet, sometimes with a ‘callable’ feature allowing the company to redeem the shares after a set period.
Singapore investors interested in preference shares should check whether a specific issue is cumulative or non-cumulative, callable or non-callable, and whether it has a fixed maturity-like redemption date or is perpetual, since these structural features significantly affect the risk and return profile and can vary widely between different preference share issues.
| Feature | Preference Shares | Ordinary Shares |
|---|---|---|
| Dividend | Fixed rate, paid first | Variable, paid after preference dividends |
| Voting rights | Usually none or limited | Yes, proportional to holding |
| Claim on assets if wound up | Priority over ordinary shares | Residual claim after all other obligations |
| Upside potential | Capped, bond-like | Uncapped, tied to company growth |
Source: general structural features of preference vs ordinary shares; always check a specific company’s prospectus or SGXNet announcement for exact terms, as features vary by issue.
Worked Example
A fictional SGX-listed company issues preference shares with a fixed dividend rate of 5% per annum on their S$1.00 issue price, meaning preference shareholders are entitled to S$0.05 per share per year before any dividend is paid to ordinary shareholders. A Singapore investor buys 2,000 of these preference shares for S$2,000, entitling her to S$100 a year in fixed dividends, assuming the company remains able to pay.
Meanwhile, another investor holds 2,000 ordinary shares of the same company, currently trading at S$1.00. In a strong year, the company might declare an ordinary dividend yielding more than 5% and the ordinary share price might also rise meaningfully — upside the preference shareholder doesn’t participate in. But in a weak year where the company can’t afford any dividend, the preference shareholder’s fixed 5% claim (if cumulative) still accumulates as an obligation, while the ordinary shareholder may receive nothing and see the share price fall.
Advantages
Preference shares offer income predictability. The fixed dividend rate provides a more bond-like, predictable income stream compared to the variable, discretionary dividends of ordinary shares.
Priority protection. Preference shareholders rank ahead of ordinary shareholders for both dividends and claims on assets if the company is wound up, offering a meaningful layer of downside protection.
Ordinary shares offer unlimited upside. As the company grows and becomes more profitable, ordinary shareholders participate fully in that growth through rising share prices and potentially rising dividends, with no cap.
Ordinary shares offer a say in the company. Voting rights let ordinary shareholders have a voice on major corporate decisions, something preference shareholders typically don’t have.
Risks and Limitations
Preference shares cap your upside. No matter how well the company performs, preference shareholders generally only receive their fixed dividend rate — they don’t benefit from extraordinary growth the way ordinary shareholders do.
Preference shares are still not guaranteed like a bond. Even cumulative preference dividends can be permanently missed if the company becomes insolvent, and preference shareholders still rank behind bondholders and other creditors in a liquidation.
Ordinary shares carry full business risk. Ordinary shareholders are last in line for both dividends and asset claims, meaning they bear the most downside risk if the company underperforms or fails.
Lower liquidity for preference shares. With fewer preference share counters and lower trading volumes on SGX, buying or selling a meaningful position can be harder and may involve wider bid-ask spreads than with popular ordinary shares.
Comparison Table
| Feature | Preference Shares | Ordinary Shares |
|---|---|---|
| Dividend type | Fixed rate, paid first | Variable, discretionary |
| Voting rights | Usually none/limited | Yes |
| Risk/return profile | Lower risk, capped return | Higher risk, uncapped return |
| Priority in liquidation | Ahead of ordinary shares | Residual, lowest priority |
| SGX availability | Fewer counters, less liquid | Thousands of counters, generally liquid |
The Bottom Line
For Singapore investors, the choice between preference and ordinary shares comes down to whether you prioritise predictable, bond-like income with downside protection, or uncapped growth potential with a say in company decisions. Most retail portfolios are built primarily around ordinary shares, with preference shares, where available, serving a more niche, income-focused role.