What Is Participating Preferred Stock?

Participating preferred stock is a type of stock that is issued by a company where shareholders can receive a regular dividend payment from the company. This type of stock is issued in addition to the common stock of a company. With participating preferred stock, the company will pay dividends to these shareholders before they pay any dividends to the common stockholders.

Accumulating Shares

The dividends from these shares are generally accumulating. This means that the company generally agrees to pay a fixed amount of dividend on a regular basis. If they do not pay the dividend, it continues to accumulate. Then when the company gets money to pay dividends, they have to pay all of the dividends that have accumulated for the participating preferred shareholders before they can pay any dividends to common stockholders.

One of the big benefits of owning this type of stock is that you have more of a claim on the company's assets than common stockholders. If a company becomes insolvent, the preferred stockholders will be able to get in line to get the assets before the common stockholders. This type of stock may not come with voting rights like common stock does. 

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