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Cumulative preferred stock requires that dividends cannot be paid on common stock until all current and previously omitted dividends are paid on preferred stock.
Cumulative preferred stock is one type of preferred stock. A preferred stock typically has a predetermined dividend yield dependent on the stock's par value. Preferred holders get this dividend at regular intervals, usually quarterly. Bonds and preferred stocks are valued similarly. Bond proceeds are viewed as a liability, whereas preferred stock proceeds are considered an asset. Priority claims on the company's assets are also made by bondholders.
A preferred stock normally has a predetermined dividend yield based on the stock's par value; cumulative preferred stock is one sort of preferred stock. This dividend is distributed to preferred holders at predetermined periods, typically quarterly. Bonds and preferred stocks have comparable values. While proceeds from preferred stock are counted as an asset, those from bonds are thought of as a liability. Bondholders also have a claim on the company's assets in priority.
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