Preferred Dividend Arrears
Separate unpaid amounts.
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A cumulative preferred dividend can remain unpaid without becoming spendable cash.
Fidelity explains that missed cumulative payments generally accumulate and precede common dividends. Missed non-cumulative payments do not accumulate. Offering terms and the issuer’s financial condition matter.
Track rights and receipts separately
Assume 100 fictional preferred shares, each with $25 par value and an 8% annual dividend paid in equal quarterly installments when declared. The scheduled quarterly amount is 100 × $25 × 8% ÷ 4 = $50.
After two missed quarters, cumulative terms without interest on arrears leave $100 accumulated but $0 received. Under otherwise identical non-cumulative terms, those missed $100 do not carry forward.
If the cumulative issuer later declares and pays both missed installments plus the next $50 installment, cash received is $150. A non-cumulative issuer paying only that next installment pays $50.
Neither scenario promises payment or its timing. Keep unpaid amounts outside cash available for bills. Check the actual series’ accumulation, declaration and payment provisions; this illustration excludes taxes, market-price changes and investment recommendations.
