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Straight vs. Cumulative Preferred

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Straight vs. Cumulative Preferred

The bankers explain the capital markets of preferred stock prices. A straight preferred security is "just a piece of paper" that agrees to pay some dividend at some point. But if it ever misses paying that dividend then...oh well, gee whiz, we didn't pay it. Bummer days for you. This kind of preferred stock is called non-cumulative (think: suckers!), and it means it will have to pay a higher dividend to compete against securities of similar risk cumulative preferred securities.

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