Early rail ventures were extremely risky. In order to entice investment, developers offered to share potential profits with investors in proportion to the number of shares investors owned. Equally divided profits are called dividends..

As today, investors always had different motives for buying stock in companies. Some investors wanted predictable income in the form of dividends. Others speculated that the value of their shares would rise and they could re-sell their shares to new investors for a profit. To accommodate investor motives (as well as their own), company executives developed two main classes of stock: common and preferred. Taken together, both are generically referred to as capital stock.

Most investors buy common stock. Stockholders of common shares always have direct stakes in their companies’ fortunes. Profits are unpredictable, so dividends are usually unpredictable. Some years, dividends are high. Some years, there are no dividends at all.

By contrast, dividends for preferred stocks theoretically remain the same from year to year. When companies pay annual dividends, they give preferred treatment to stockholders of preferred stock. They pay preferred stockholders first, and if there is any money left, they pay dividends to common stockholders.

Since preferred stockholders receive predictable dividends, they do not directly benefit when company profits rise. In that respect, 'preferred' does not necessarily mean 'better.'

Larger companies often issued sub-classes of preferred stock, with an internal pecking order in the distribution of both the amount and priority of dividends. Typical sub-classes include first preferred, second preferred, and prior preferred.

The terms capital and corporate stock represent the total issuance of all common and preferred stock. In practice, most companies issued only one kind of stock, so the terms common, corporate, ordinary, and capital stock are often synonymous.

Generally, only the most secure companies issued preferred stock. Consequently, common stocks are about five times more plentiful than preferred stocks. In general, though, collectors pay about the same for common and preferred stocks.

Preferred stock certificates are known from as early as 1836. They gained popularity after 1870, but their issuance probably peaked during the 1930s.

You will occasionally see convertible preferred stock certificates. Provisions allowed owners to convert preferred shares into common shares under certain conditions.

Occasionally stockholders’ opinions were at odds with company executives who wanted to retain tight control over how they ran their companies. Around the turn of the century, railroad executives devised ways to decrease the interference of pesky investors. In some companies, they sub-divided both common and preferred stocks into voting and non-voting classes. Investors generally want to feel like they can influence their companies, so they have always been reluctant to buy non-voting stock shares. Companies try to entice purchase by promising higher dividends or other favorable features. In general, only well-run, profitable companies have successfully sold non-voting classes of stock.

Companies have often been more successful at selling non-voting classes of stock to their employees. Because of often extreme limitations on selling, only a few such examples survive on the collectibles market.

Early stocks were assessable. That meant that if companies ran into financial trouble, they assessed stockholders for additional funds. It was not uncommon for shaky companies to request additional funds from stockholders time and again. Average investors could ill afford the luxury of owning assessable stock.

Companies often enticed investors by selling their assessable stock for fractions of the stated par value. Many, many examples exist of companies which were officially capitalized for $50 per share, but which sold their initial shares for 10% down. At $5 per share, average, middle class citizens could 'invest' in up-and-coming railroads, often buying more shares than they could otherwise have afforded.

Especially when the assessments came.

Eventually, investors drifted away from assessable stocks,. This meant companies had to discover new ways to keep their stocks attractive as investments. Most made their certificates non-assessable. That designation still appears on modern certificates.

Occasionally, you will encounter certificates that look like ordinary stock certificates, but are labeled voting trust certificates. Corporations on the verge of failure often needed to make far-reaching decisions very quickly. That was difficult if companies needed to solicit votes from hundreds or thousands of stockholders.

To streamline voting during perilous financial times, companies often formed 'voting trusts' composed of small groups of knowledgeable decision makers. (Usually under court order, of course.) This meant that ordinary shareholders needed to 'trust' those groups to make good decisions.

Voting trusts generally printed special certificates and temporarily traded them to stockholders for ordinary shares. If the trusts successfully rescued companies from bankruptcy, they returned ordinary stock certificates to their rightful owners.

All but a tiny number of U.S., Canadian, and Mexican stock certificates were registered. That means companies kept records of investors who owned stock. Only a few bearer stocks from North America are currently known.