If a corporation fails to pay a dividend in a given year on a cumulative preferred stock, that dividend accumulates and must be paid in future years before common stockholders can receive a dividend.

Question

Quizplus · Accepted Answer

Cumulative preferred stock has a feature where unpaid dividends accumulate and must be paid out before any dividends can be distributed to common stockholders. This ensures that preferred stockholders receive their due dividends before common stockholders in case of missed payments.

If a Corporation Fails to Pay a Dividend in a Given