Cumulative Dividend

AAA

DEFINITION of 'Cumulative Dividend'

A sum that publicly traded companies must remit to preferred shareholders without regard to the company's earnings or profitability. A cumulative dividend must be paid, whereas a regular dividend, also called a non-cumulative dividend, may be paid to or withheld from shareholders at the company's discretion. If a company cannot pay a cumulative dividend when it is due, it is still responsible for paying it in the future, possibly with interest, and it must fulfill this obligation before it can award dividends to common shareholders. This feature makes cumulative preferred shares more valuable than non-cumulative preferred shares or common shares.

INVESTOPEDIA EXPLAINS 'Cumulative Dividend'

Cumulative dividends are intended to ensure investors a minimum return on their investment in the company. Cumulative dividend provisions may contain limitations, such as being payable only if the company liquidates. Preferred shares usually pay cumulative dividends, but not always. A company that issues cumulative preferred stock must disclose any accumulated, unpaid dividends in its financial statements.






RELATED TERMS
  1. Common Stock

    A security that represents ownership in a corporation. Holders ...
  2. Preferred Stock

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

    1. A distribution of a portion of a company's earnings, decided ...
  4. Noncumulative

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

    A type of preferred stock with a provision that stipulates that ...
  6. Policyholder Dividend Ratio

    The policyholder dividend ratio is a measurement of the profitability ...
Related Articles
  1. Investing

    What is the difference between preferred stock and common stock?

    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's assets and earnings. This is true during the good times when the ...
  2. Bonds & Fixed Income

    A Primer On Preferred Stocks

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

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  4. Options & Futures

    Dividends, Interest Rates And Their Effect On Stock Options

    Learn how analyzing these variables are crucial to knowing when to exercise early.
  5. Fundamental Analysis

    Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."
  6. Investing

    Why don't investors buy stock just before the dividend date and sell right afterwards?

    Many years ago, unscrupulous brokers would use the same logic on their clients as a sleazy sales tactic. These brokers would tell a customer to purchase shares in a particular investment that ...
  7. Options & Futures

    What is the incentive to buy a stock without dividends?

    While dividends are the only direct income (money paid out), the total return of holding, a stock is the dividend plus the capital gain of the stock price. Dividend-paying stocks consist mainly ...
  8. When most investors begin planning for a steady income stream in retirement, they tend to gravitate towards fixed-income as a predominant asset class.
    Mutual Funds & ETFs

    Funds That Should Be On Every Investor’s Radar

    When most investors begin planning for a steady income stream in retirement, they tend to gravitate towards fixed-income as a predominant asset class.
  9. Though dividends are thought to realm of conservative investors, they deserve a place in all portfolios. Here are some of the best bets.
    Trading Strategies

    The Best Bets In Dividend Stocks

    Though dividends are thought to realm of conservative investors, they deserve a place in all portfolios. Here are some of the best bets.
  10. Lifestyle inflation occurs when 'you earn more, you spend more', and your spending ends up matching your earnings. Thus, no savings remain.
    Budgeting

    Failing To Build Wealth Despite Making Big Bucks?

    Lifestyle inflation occurs when 'you earn more, you spend more', and your spending ends up matching your earnings. Thus, no savings remain.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center