Accumulated dividend

An accumulated dividend is a dividend on cumulative preferred stock that is due but has not yet been paid. This dividend is an obligation of the corporation, so it is recorded as a liability on the balance sheet until it is paid. These dividends must be paid before any other dividends can be paid out. Thus, the holders of cumulative preferred stock have a payment preference over the holders of non-cumulative preferred stock and common stock. Investors prefer cumulative preferred stock, since they will earn the right to receive dividends at some point in the future, even if the company does not have the cash flow to make the payments right now.

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The Balance Sheet