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LSDefine
Simple English definitions for legal terms
accumulative dividend
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A quick definition of accumulative dividend:
An accumulative dividend is a part of a company's earnings or profits that is distributed to its shareholders. It can be in the form of cash or additional shares. A cumulative dividend grows from year to year when not paid and is usually on preferred shares. It must be paid in full before common shareholders may receive any dividend. If the corporation does not pay a dividend in a particular year or period, it is carried over to the next year or period and must be paid before the common shareholders receive any payment.A more thorough explanation:
An accumulative dividend is a type of dividend that grows from year to year when not paid. It is usually on preferred shares, and it must be paid in full before common shareholders may receive any dividend. If the corporation does not pay a dividend in a particular year or period, it is carried over to the next year or period and must be paid before the common shareholders receive any payment.
For example, if a company declares a $1 accumulative dividend on preferred shares and does not pay it in the first year, the dividend will accumulate to $2 in the second year. The company must pay the $2 dividend before any common shareholders receive a dividend.
Accumulative dividends are different from noncumulative dividends, which do not accrue for the benefit of a preferred shareholder if there is a passed dividend in a particular year or period.