cumulative preferred

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Explanation of "Cumulative Preferred"

Definition: "Cumulative preferred" refers to a type of preferred stock (a kind of investment) where, if the company does not pay dividends (the money given to shareholders), those unpaid dividends accumulate over time. This means that the company must pay the missed dividends before it can pay dividends to common stockholders (another type of shareholder).

Usage Instructions

• Context: This term is used primarily in finance and investing. It is important for investors to understand the difference between cumulative preferred stock and other types of stock, especially when considering investments.
• Type of Word: It is a noun phrase.

Example

• If a company has cumulative preferred stock and decides to skip dividend payments for two years, the total amount owed to those shareholders will be added up. When the company resumes paying dividends, it must first pay the shareholders what they are owed from the past two years before paying any dividends to common stockholders.

Advanced Usage

• Investors often look for cumulative preferred stocks because they provide more security in terms of dividend payments. If a company faces financial difficulties, the cumulative feature ensures that investors will eventually receive the dividends owed to them.

Word Variants

• Cumulative: This word means something that builds up over time. For example, "cumulative effects" refer to the results that accumulate from various factors.
• Preferred Stock: This can simply refer to a class of stock that has priority over common stock in dividend payments and asset liquidation.

Different Meanings

• In finance, "cumulative" can also apply to other areas like "cumulative interest," which is the total interest that builds up over time on a loan or investment.
• "Preferred" can refer to anything that is favored or chosen over others, such as "preferred seating" in a theater.

Synonyms

• Accumulating preferred stock
• Accrued preferred stock (another term often used to describe similar concepts)

Idioms and Phrasal Verbs

While "cumulative preferred" does not have specific idioms or phrasal verbs associated with it, understanding the context of investment might lead to phrases like: - "Pay your dues": This can refer to fulfilling obligations, similar to how dividends must be paid to cumulative preferred shareholders before others.

Summary

"Cumulative preferred" is an important term in finance, specifically regarding stock investments. Investors should be aware that this type of stock ensures that unpaid dividends will accumulate and must be paid before any dividends go to common stockholders.

Academic

Noun

1. preferred stock whose dividends if omitted accumulate until paid out

Synonyms

• cumulative preferred stock