Series 6 - Investment Company And Variable Contracts Products Representative Exam
This security guarantees that any dividends in arrears are paid prior to paying a preferred stock or common stock dividend:
Buyers of preferred stock expect fixed-dividend payments. The directors of a company in financial difficulty can reduce or suspend dividend payments to both common and preferred stockholders. With cumulative preferred, any dividends in arrears must be paid prior to paying a regular preferred stock dividend or a common stock dividend.