Preference shares as the name suggests gets preference over equity shares with regard to payment of dividend.Preference shareholders enjoy fixed rate of dividend.They are paid dividend prior to equity shareholders.
What I would briefly say in addition to what Ajay has said is Preference shares rank ahead in terms of dividend as well as repayment of capital. The advantage of preference having a fixed rate of dividend is its disadvantag too as the holders of this category of capital can't enjoy the higher rates that equity shareholders can earn dividends but in this case the main disadvantage is there is no commitment on the part of the company to pay any dividend. There might be years of higher dividend,lower dividend or no dividend for the equity capital!!
