A cumulative dividend preference means that:
A) preferred stockholders are paid dividends before common stockholders are paid dividends for the current year only.
B) unpaid dividends to preferred stockholders accumulate and must be paid before common stockholders receive dividends.
C) preferred stockholders are paid their full fixed dividend rate each period as long as the company is in operation.
D) unpaid cash dividends to preferred stockholders must be replaced with stock dividends during the current

Question

Quizplus · Accepted Answer

A cumulative dividend preference means that if the company is unable to pay dividends in a particular year, the unpaid dividends accumulate and must be paid before any common stock dividends can be paid. This ensures that preferred stockholders receive their fixed dividend rate in full, even in years with financial difficulties.

A Cumulative Dividend Preference Means That