Money101 wrote:Don't you also get this benefit with common stock?
Correct. Although you'd normally expect the current yield on the common to be less than on preferred; but that's not a hard and fast rule, I'll bet recently there may have been more exceptions to it than usual.
Why does the common stock have more upside potential?
The common represents ownership of the company. As, or if, the company earnings grow, then after preferred dividends and bond interest, what's left can flow to either the book value or increased dividends. If people buy using P/E or P/B as a guide, they will pay more for the common if this growth happens. Over time the growth could be substantial. Whereas for preferreds, the dividends are at best pretty much fixed so the price could oscillate with interest rates, but not have unlimited upside. (That would be my view of the basic idea, but I'm sure there's lots of details/exceptions one could ponder.)