Cumulative preferred stock is a type of preference share that has a provision that mandates a company must pay all dividends, including those that were missed previously, to cumulative preferred shareholders.

What is meaning of cumulative preference shares?

In short, cumulative preference shares are regular preference shares with one additional benefit. The extra advantage here is that the holders of these shares have the right to receive dividends even if the issuing company has missed out on paying them in the past.

Which preference shares are called cumulative preference shares?

Preference shares which can convert into equity shares of a company are called as convertible preferential shares. Some preference shares can also receive arrears of dividend. These are called cumulative preference shares.