Legal Definitions - cumulative stock

Cumulative stock is a type of preferred stock that must receive full dividends before common shareholders can receive any. If the corporation fails to pay a dividend in a particular year, it is carried over to the next year and must be paid before common shareholders receive any payment. This type of stock is also known as cumulative preferred stock.

For example, if a corporation has both common and cumulative preferred stock, and it fails to pay dividends for a year, the cumulative preferred stockholders will receive their dividends before the common stockholders receive any payment.