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.
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