Series 65: 2.3.5.1. Cumulative Preferred Stock

2.3.5.1. Cumulative Preferred Stock

Corporations can offer different types of preferred stock. Cumulative preferred stock allows dividends to accumulate when a payment is not made to a stockholder. If a corporation misses a dividend payment, 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; however, 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-cumulative will typically offer higher dividends than cumulative