CUMULATIVE PREFERRED STOCK Meaning and
Definition
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Cumulative preferred stock is a type of ownership interest in a corporation that grants its holders certain rights and privileges, typically with regards to dividends and liquidation preferences. It represents a specific class of stock that receives preferential treatment over common stockholders in terms of payouts and capital repayment.
The term "cumulative" implies that if the company fails to distribute dividends to the preferred stockholders in any given period, the unpaid dividends accumulate and must be paid off before the common stockholders can receive any dividends. These accumulated unpaid dividends are known as dividends in arrears.
Preferred stockholders, including those with cumulative preferred stock, possess a priority claim on the company's assets and earnings in the event of liquidation or bankruptcy. In such circumstances, they are entitled to receive their original investment amount plus any accrued dividends in preference to the common stockholders.
One of the main advantages of cumulative preferred stock for investors is the assurance of receiving periodic dividends, even during financially challenging periods for the company. This feature signifies a stable income stream and a level of security since the dividends must be paid before any profits are allocated to common stockholders.
However, the downside for corporations issuing cumulative preferred stock is the obligation to pay dividends to preferred stockholders in the future, which could restrict the availability of funds for other purposes or reduce the flexibility of the company's cash flow management. Nevertheless, cumulative preferred stock remains an attractive investment option for those seeking a relatively predictable income source within a company's capital structure.
Common Misspellings for CUMULATIVE PREFERRED STOCK
- xumulative preferred stock
- vumulative preferred stock
- fumulative preferred stock
- dumulative preferred stock
- cymulative preferred stock
- chmulative preferred stock
- cjmulative preferred stock
- cimulative preferred stock
- c8mulative preferred stock
- c7mulative preferred stock
- cunulative preferred stock
- cukulative preferred stock
- cujulative preferred stock
- cumylative preferred stock
- cumhlative preferred stock
- cumjlative preferred stock
- cumilative preferred stock
- cum8lative preferred stock
- cum7lative preferred stock
Similar spelling word for CUMULATIVE PREFERRED STOCK
- NON-CUMULATIVE PREFERRED STOCK.
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