TLDR:
A cumulative dividend is a feature of preferred stock where unpaid dividends accumulate and must be paid out before any dividends are distributed to common shareholders.
How Cumulative Dividends Work
When a company fails to pay its cumulative preferred dividend in a given period, the unpaid amount “accumulates” and must be paid before any common shareholders can receive dividends or, in many structures, before the company can make distributions in a liquidation. For example, if a Series A preferred stock has a cumulative 8% annual dividend on a $10M investment and the company pays no dividends for three years, the accumulated dividend owed would be $2.4M.