Cumulative Preferred Stock


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.


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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.

  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. Zero-Dividend Preferred Stock

    A preferred share that is not required to pay a dividend to its ...
  4. Noncumulative

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

    Preferred stock that includes an option for the holder to convert ...
  6. Accrued Dividend

    An accounting term referring to the balance sheet item that accounts ...
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  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 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 >>
  5. 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 >>
  6. How many votes am I entitled to, if I own ordinary shares of a company?

    If an investor owns one ordinary share of a company, that investor is entitled to one vote on all of that company's major ... Read Full Answer >>

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