Cumulative Preferred Stock

Loading the player...

DEFINITION of 'Cumulative Preferred Stock'

A type of preferred stock with a provision that stipulates that if any dividends have been omitted in the past, they must be paid out to preferred shareholders first, before common shareholders can receive dividends.

BREAKING DOWN 'Cumulative Preferred Stock'

A preferred stock will typically have a fixed dividend yield based on the par value of the stock. This dividend is paid out at set intervals, usually quarterly, to preferred holders. If a company runs into some financial problems and is unable to meet all of its obligations, it will likely suspend its dividend payments and focus on paying the business-specific expenses. If the company gets through the trouble and starts paying out dividends again, it will first have to pay back all of the dividends that are owed to preferred share holders.

RELATED TERMS
  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  2. Dividend

    A distribution of a portion of a company's earnings, decided ...
  3. Accrued Dividend

    An accounting term referring to the balance sheet item that accounts ...
  4. Noncumulative

    A type of preferred stock that does not pay the holder any unpaid ...
  5. Zero-Dividend Preferred Stock

    A preferred share that is not required to pay a dividend to its ...
  6. Participating Preferred Stock

    A type of preferred stock that gives the holder the right to ...
Related Articles
  1. Investing

    What is Cumulative Preferred Stock?

    Cumulative preferred stock is a type of stock that stipulates any skipped or omitted dividends must be paid to its holders before common shareholders can receive dividends.
  2. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  3. Investing

    Where to Ride Out the Volatility

    The one word that characterizes financial markets today: volatile. Take a look at these three considerations.
  4. Term

    The Advantages of Preferred Dividends

    Preferred dividends are cash distributions a company pays on its preferred shares.
  5. Mutual Funds & ETFs

    Preferred Stock ETFs Vs Bond ETFs

    If you’re weighing an investment in a preferred stock exchange-traded fund versus a bond ETF, there are two factors you should consider most.
  6. Investing Basics

    Explaining Wedding Warrants

    A wedding warrant is a warrant that can only be exercised if the host asset, usually a bond or preferred stock, is surrendered.
  7. Mutual Funds & ETFs

    PGX: PowerShares Preferred ETF

    Read an in-depth analysis of the PowerShares Preferred ETF, a preferred share-based ETF that focuses on generating investor income.
  8. Mutual Funds & ETFs

    3 ETFs that are Top Bets for Retirement in 2016 (SCHZ, VYM)

    Look at three ETFs that retirees or near-retirees should consider heading into 2016, and why it's important to consider both bond and equity funds.
  9. Investing

    Weighted Average Cost Of Capital (WACC)

    Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality
  10. Markets

    Are EM Stocks Finally Emerging?

    Many investors are looking at emerging market (EM) stocks and wonder if it’s time to step back in, while others wonder if we’ll see further declines.
RELATED FAQS
  1. What is the difference between horizontal integration and vertical integration?

    Although holders of preference shares and bonds are both entitled to regular distribution payments, preference shares do ... Read Full Answer >>
  2. Why do some preferred stocks have a higher yield than common stocks?

    Before we answer this question, let's just take a quick review of what a stock's yield is actually measuring. The yield is ... Read Full Answer >>
  3. Is preferred stock an equity or a fixed-income security?

    Preferred stock is equity. Preferred stock also (usually) has a fixed dividend payout. This is why some investors have referred ... Read Full Answer >>
  4. What are ComputerShare's escheatment services?

    Escheatment is the process by which ownership of abandoned property is transferred to the state. Escheated property can include ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Hot Definitions
  1. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  2. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  3. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  4. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  5. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center