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Finance Dictionary and Glossary of Investment Terms
A limitation placed upon corporations ensuring the payment of preferred dividends before making distributions to common shareholders.
A dividend paid on cumulative preference shares, that the company is liable for in the next payment period if not satisfied in the current payment period (i.e. the dividends accumulate). Unlike a dividend on common stock that the company can pay out to shareholders if they want, dividends on cumulative preferred shares are an obligation regardless of the earnings of the company. The unpaid accumulated preferred stock dividends must be paid before any common stock dividends are.