What preferred shares might allow shareholders to receive additional dividends based on the performance of common stockholders?

Participating preferred shares grant shareholders the potential to receive additional dividends based on the performance and profitability of common stockholders. These shares typically provide a fixed dividend rate, but they also allow investors to partake in extra dividends if the company performs particularly well and common stockholders receive dividends that exceed a certain threshold.

This is beneficial for investors because it offers the security of a fixed income while also providing an opportunity to benefit from the company's growth and financial success, similar to how common shareholders might. If the company declares greater than expected earnings leading to higher dividends for common shares, participating preferred shareholders can also be eligible for extra distributions, aligning their interests with the performance of the company's overall equity.