Different kinds of preferred stock.
Dividends accrue even though they are not actually paid. If a company is somewhat short of cash, the payment of dividends on preferred stock may be suspended. When the situation improves and the payment of dividends is resumed, cumulative preferred stockholders are paid their accrued dividends before any payment is made to common stockholders and before shares are redeemed.
- Redeemable (Callable)
Most preferred stock issues are also redeemable, which means that the issuing company has the right to purchase the shares from the stockholders.
Shareholders have the option to convert their shares into common stock using a predetermined formula - mandatory convertible stock is automatically converted into common stock at pre-specified dates. convertible preferred stock is also usually callable. This enables the issuer to call the stock and force preferred stockholders to choose between accepting either par value or shares of common stock (forced conversion).
Entitled to partake in a further share of the profits of the issuing company through the payment of a participating dividend (after common stockholders have received their dividend).