Accounting Dictionary

Participating Preferred

Participating preferred is a type of preferred stock whose dividend can increase if the company has a very large profit.

Most preferred stock has a set dividend. If you bought $100 par 5% participating preferred, your dividend would be set at $5 (.05 x $100). Every issue of participating preferred stock has different parameters, but the idea is that if the company has profits exceeding a certain amount your dividend will increase by a given percentage.

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