Participating preferred stock requires that if a company fails to pay a dividend in any year, it must make it up in a later year before paying any common dividends.

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Participating preferred stock refers to preferred shares that have the right to receive dividends exceeding the stated amount in certain situations, not to the requirement to make up missed dividends in later years. The feature described is characteristic of cumulative preferred stock.

Participating Preferred Stock Requires That If a Company Fails to Pay