Cumulative Preferred Stock
Definition:
Cumulative preferred stock is a type of investment in a company. It is called "preferred" because it gives its owners certain advantages over common stockholders, especially regarding dividends. If the company does not pay dividends in a particular year, those unpaid amounts are accumulated and must be paid out before any dividends can be distributed to common stockholders in the future.
Usage Instructions:
You can use the term "cumulative preferred stock" when discussing investments, finance, or the stock market. It's often mentioned in contexts related to company shares and dividend payments.
Example Sentence:
"Investors prefer cumulative preferred stock because if the company faces financial difficulties, they know that their unpaid dividends will still be owed to them in the future."
Advanced Usage:
In discussions about corporate finance, you might hear phrases like "dividend arrears" or "liquidation preference" when referring to cumulative preferred stock. These terms relate to the rights and protections that come with owning this type of stock.
Word Variants:
- Preferred Stock: A broader category that includes cumulative preferred stock and other types of preferred stock. - Common Stock: Another type of stock that typically does not have the same priority for dividends as preferred stock.
Different Meaning:
While "cumulative" generally means "adding up" or "increasing," in this context, it specifically refers to the accumulation of unpaid dividends.
Synonyms:
- Accumulating preferred shares - Accumulation stock (though this is less common)
Idioms and Phrasal Verbs:
There aren't specific idioms or phrasal verbs directly associated with "cumulative preferred stock," but understanding terms like "pay out" (to distribute money) and "fall behind" (to not keep up with payments) can help in discussions about dividends.
Summary:
Cumulative preferred stock is an investment choice with the safety of accumulating unpaid dividends.