Participating preferred stock


Participating preferred stock

Preferred stock that provides the holder with a specified dividend plus the right to additional earnings under specified conditions.

Participating Preferred Stock

A stock, entitling the bearer to part ownership in the issuing company, and also to a certain minimum dividend. The dividend paid may be higher than the minimum depending upon company performance. In any case, these dividends must be paid before any dividends are paid on common stock, and if a company is unable to pay dividends on participating preferred stock, stockholders have the right to force the liquidation of the company. Private equity and venture capital firms often use participating preferred stock as a means of financing their investments. Unlike most other preferred stock owners, participating preferred stockholders sometimes have voting rights in the company. See also: Cumulative preferred stock, Non-cumulative stock, Convertible stock.