Hi! Thanks for the question.
The following are the characteristics of dividend payments when it
comes to preferred stocks:
“A ‘fixed-rate’ preferred provides for a set or ‘fixed-rate’ dividend
upon issue, usually declared and paid quarterly. This can either be
set as a fixed dollar value dividend or a stated percent of the par
value. For example, a $25 par preferred share might set a $1.25 annual
dividend or provide for a 5% of par payment which would also be $1.25
(5%x$25).”
“’Floating-rate’ preferred shares provide for a dividend that is paid
by reference to a market interest rate. For example, a common Canadian
structure is to use a percentage of the commercial bank prime rate. If
the preferred provisions say 80% of the prime rate payable monthly,
the prime rate divided by twelve would be taken each month and
multiplied against the par amount and 80% of the result would be paid
out to the preferred shareholder.”
“Most preferred shares are "cumulative" which means that skipped
dividend payments are accumulated until they are finally paid. For
example, a company that missed two years worth of preferred share
dividends would have to pay all the missed payments before it paid out
anything to the common shareholders. “
“’Non-cumulative’ preferred shares do not accumulate dividends that
are in arrears. In the last six years, financial institutions have
been issuing preferred shares as subordinate capital to meet the
international capital standards.”
“Types of Preferred Shares”
http://www.finpipe.com/equity/preftyp.htm
Participating preferred shareholders also receive extra dividends
aside from those mentioned above.
“Preferred stocks may be called participating, nonparticipating,
convertible, cumulative, noncumulative, and callable. Participating
shares may receive extra dividends along with common shares when the
company has been profitable and the board of directors authorizes
dividend payments to common shareholders. While the added payment
won't be as large as the payment made to common shareholders, this
feature nevertheless provides preferred shareholders added
participation in company earnings. Nonparticipating shares do not
receive a dividend payment beyond that specified as the normal
dividend for those shares.”
“Why I Don't Use Preferred Stocks”
http://www.fool.com/retirement/retireeport/2000/retireeport000731.htm?source=EDNWFH
I found another characteristic that only applies to cumulative
preferred shares. Cumulative preferred shareholders can vote in
company issues if the former misses on a set number of dividend
paments.
“Unlike common shares, preferred shares don't give you the right to
share in a company's fortunes. Your rights end at getting a set amount
of dividends and having a prior claim on the company's assets ahead of
common shareholders if the firm goes out of business. Only if the
company misses a set number of dividend payments do preferred
shareholders have a right to vote in the company's affairs.”
“Preferred Shares”
http://info.nbfinancial.com/fbn/cda/theme/0,,divId-2_langId-1_navCode-10092_navCodeExTh-0,00.html
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