Sometimes a company that issues no-par stock may decide later to apply a stated value to the stock. Issuing Preferred Stock. In addition to issuing common stock, a company can choose to issue preferred stock. Preferred stockholders usually get a preference over common stockholders in receiving dividends declared by the company. The amount of dividends to which preferred stockholders are entitled is usually expressed as a percentage of the preferred stock's par value, as illustrated below.
Preferred stock can be noncumulative.
This means that if the company chooses not to pay dividends during any period, the missed dividends do not accumulate for payment in some future period. The amount of dividends received by preferred and common stockholders is illustrated below. Preferred stock can be cumulative. This means that if the company chooses not to pay dividends during any period, the missed dividends accumulate for payment in some future period. Any dividends not paid in a particular period are known as dividends in arrears.