Cumulative Dividend
Unpaid preferred dividends that keep accruing and must be paid before any distribution to common stock.
Definition
With a cumulative preferred, dividends not declared in a given period are not lost: they accumulate in arrears and must be paid before the company can distribute any dividend to common stockholders. With a non-cumulative preferred, by contrast, skipped dividends are forfeited with no claim. The difference is substantial: cumulative terms offer better contractual protection, but the real protection depends on the company surviving — arrears do not earn interest and are not adjusted for inflation. Of Strategy's preferreds, STRK and STRF are cumulative; STRC and STRD are not.
In Context
STRK is cumulative at 8%; if Strategy skipped a quarter, that $2 per share would remain owed until paid.
Related Terms
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