Cumulative preferred stock is a type of preferred equity security that guarantees its shareholders the right to receive any missed or unpaid dividends before common stockholders receive any dividends. This feature ensures that if a company faces financial difficulties and cannot pay dividends in a given year, the unpaid amounts accumulate and must be paid in future years before any distributions are made to common shareholders. This characteristic makes cumulative preferred stock a more secure investment compared to non-cumulative preferred stock.
congrats on reading the definition of cumulative preferred stock. now let's actually learn it.