Which of the following statements is true about preferred stocks?

Preferred stocks are a unique category of equity that combines features of both common stocks and bonds. One of the most significant characteristics of preferred stocks is that they have priority over common stockholders when it comes to dividend payments. This means that if a company decides to distribute dividends, preferred shareholders receive their dividends before common shareholders do. This priority status provides a level of income security for investors who hold preferred stocks, making them an attractive option for income-focused investors.

In contrast, the other statements contain inaccuracies regarding the nature of preferred stocks. For instance, preferred stocks generally do not confer voting rights, which is a feature more commonly associated with common stocks. Additionally, preferred stocks tend to have higher, not lower, dividend payouts compared to common stocks, as they are designed to pay fixed dividends. Lastly, while preferred stocks can be sold on the stock market, they are not limited to that; they may also be traded in private transactions. Thus, the statement highlighting the priority for dividends accurately captures one of the core benefits of owning preferred stocks.