CUMULATIVE PREFERRED Meaning and
Definition
-
Cumulative preferred refers to a type of preferred stock that entitles the shareholder to receive cumulative dividends if the company fails to pay them. This means that if a company misses a dividend payment or cannot pay the full amount, it will accrue and accumulate, and the company is obligated to pay them in the future, often before common stock dividends are paid. Cumulative preferred stockholders have a higher priority claim over common stockholders in receiving dividends.
The cumulative feature distinguishes this type of preferred stock from non-cumulative preferred stock. Non-cumulative preferred stock does not accumulate missed dividends and does not have the same entitlement for future payment. If a company fails to pay a dividend on non-cumulative preferred stock, the shareholder forfeits the payment and does not reserve the right to receive it later.
The advantage of owning cumulative preferred stock is the assurance of receiving missed dividends in the future when the company improves its cash flow. It provides a level of security for investors, as it guarantees they will eventually receive their missed dividend payments. However, it is important to note that cumulative preferred shareholders usually do not have voting rights and have lower potential for capital appreciation compared to common stockholders.
Common Misspellings for CUMULATIVE PREFERRED
- xumulative preferred
- vumulative preferred
- fumulative preferred
- dumulative preferred
- cymulative preferred
- chmulative preferred
- cjmulative preferred
- cimulative preferred
- c8mulative preferred
- c7mulative preferred
- cunulative preferred
- cukulative preferred
- cujulative preferred
- cumylative preferred
- cumhlative preferred
- cumjlative preferred
- cumilative preferred
- cum8lative preferred
- cum7lative preferred
Etymology of CUMULATIVE PREFERRED
The word "cumulative" in the term "cumulative preferred" comes from the Latin word "cumulare", meaning to heap up or accumulate. It is derived from the Latin word "cumulus", which means a mound or heap.
The word "preferred" in this context refers to a class of stock that holds certain preferential rights and privileges over common stock. It comes from the verb "prefer", which is derived from the Latin word "praeferre", meaning to carry in front, or to favor.
When combined, "cumulative preferred" describes a type of preferred stock that has the ability to accumulate and receive unpaid dividends in the future if they are not paid in a particular period. So, the etymology of "cumulative preferred" essentially combines the concept of accumulation and preference in relation to stock.
Similar spelling word for CUMULATIVE PREFERRED
Infographic
Add the infographic to your website:
