A type of dividend which, if not paid when due, accumulates until the next time the corporation pays dividends (with the oldest deferred payment made first). Cumulative dividends are only payable on preferred stock (although not all preferred stock includes this right). Dividends on common stock are payable only if and when declared by a corporation's board of directors. Any unpaid cumulative dividends must be paid before any common stock dividends are paid.

For more information, see Practice Notes, Preferred Stock: Overview and Preferred Stock in Private Equity Transactions: Significant Tax Issues.

For a form of certificate of designation with a cumulative dividend, see Standard Document, Certificate of Designation of Preferred Stock (Convertible, Double-Dip Participating).