Cumulative preference shares

Cumulative preference shares will accumulate any dividend that is not paid when due.

Any unpaid dividend is added to the amount payable the following year and no dividends can be paid on ordinary shares until the entire backlog of unpaid dividends on cumulative prefs is cleared.

Unless a company is in a very poor financial condition, holders of cumulative prefs can be fairly sure of getting the due pseudo-interest, although the timing is somewhat more uncertain than would be the case with bonds.