SIE: Cumulative Preferred Stock

Cumulative Preferred Stock

Corporations can offer different types of preferred stock. Cumulative preferred stock allows dividends to accumulate when a dividend payment is not made to a stockholder. If a corporation skips a dividend payment on cumulative preferred shares, it will have to pay the accrued dividend the next time it offers a dividend, before it pays common stockholders.

Non-cumulative preferred stock does not accrue unpaid dividends. Few companies issue shares of non-cumulative preferred, since they are unattractive to investors, but terms may sometimes be added to improve their value, such as fixing the number of allowable missed payments or automatically granting voting rights when a payment is missed. Non-c