Noncumulative

AAA

DEFINITION of 'Noncumulative'

A type of preferred stock that does not pay the holder any unpaid or omitted dividends. If the corporation chooses to not pay dividends in a given year, the investor does not have the right to claim any of those forgone dividends in the future.

INVESTOPEDIA EXPLAINS 'Noncumulative'

In the case that preferred shares are cumulative, holders are entitled to any missed or omitted dividends. For example, let's assume that ABC Company chooses to not pay its $1.10 annual dividend to its cumulative preferred stockholders. In this case, these shareholders do not receive the dividend this year, but they are entitled to collect this dividend at some point in the future. If the preferred shares mentioned above were noncumulative, the shareholders would never receive the missed dividend of $1.10. The example above illustrates why a cumulative preferred share is worth more than a noncumulative preferred share.

RELATED TERMS
  1. Shareholder

    Any person, company or other institution that owns at least one ...
  2. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  3. Convertible Preferred Stock

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

    1. A distribution of a portion of a company's earnings, decided ...
  5. Cumulative Preferred Stock

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

    A sum that publicly traded companies must remit to preferred ...
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. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  3. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  4. Bonds & Fixed Income

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  5. Bonds & Fixed Income

    What are the benefits and drawbacks of owning preferred stock and common stock?

    Owning a share of a company can be accomplished through the purchase of common or preferred stock, but there are benefits and drawbacks for each option.
  6. Investing Basics

    What is common stock and preferred stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable rights of ownership.
  7. Fundamental Analysis

    Why would I need to know how many outstanding shares the shareholders have?

    Find out why shareholders should know how many outstanding shares have been issued by a corporation, and learn what happens when more shares are issued.
  8. Bonds & Fixed Income

    How does preferred stock differ from company issued bonds?

    Discover the primary differences between preferred stock and corporate bonds, two income-generating investment vehicles issued by certain companies.
  9. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  10. Fundamental Analysis

    How do you use Microsoft Excel to calculate liquidity ratios?

    Learn how to calculate the most common liquidity ratios in Microsoft Excel by inputting financial figures from a company's balance sheet.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center