If a cummulative preferred misses a dividend payment and then you sell the stock, when they eventually pay back the missed payments do you still get the missed payment even though you no longer own it ?
Don
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5 - Click To Post Comments:
Hello Don-
This is a great question. Since a CDx3 Preferred Stock has never missed a dividend payment (my data goes back to 1936 on this), you are describing a scenario that I have never encountered so I had to do some digging.
Accoding to the Reorganization and Safekeeping department at TD Ameritrade: "if you should sell the stock, you would not be entitled to the previously owed dividends. You must still hold the security so as to receive the payment."
Yet another reason to only invest in the highest quality preferred stocks that have a 100% perfect track record of never missing a dividend payment - those that are able to meet the ten CDx3 Selection Criteria from chapter 7 of my book, Preferred Stock Investing.
Many Happy Returns.
Thanks for the reply. In that case would the current owner get all the backlog dividends or the company doesn't have to pay anyone?
Thanks
suresh
With a cumulative preferred stock (such as all CDx3 issues) the issuing company is obligated to pay all previously deferred dividends (in accordance with the terms of the prospectus).
Many Happy Returns.
If the seller doesn't get it and if the company is obligated to pay than the current owner will get all deferred dividends even for periods he didn't own those shares. Is this correct?
Thanks
Suresh
Yes.
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