More on cumulative dividends
Eric Belsley from our office had this to add on the subject of accruing but non-cumulative dividends. More concise and to the point than my post of Wednesday.
This is a relatively unusual provision. However, it would mean that although dividends accrue daily (and thus are computed when payable on a number of days in the year to date basis), the amount of such dividends is reset to $0 at the beginning of each year.
An interesting issue is the effect of this provision on payments made in liquidation and redemption. If the liquidation and redemption sections expressly refer only to "accrued and unpaid dividends" in addition to the principal amount, the company would have an argument that the non-cumulative nature of the dividend reduces the payout attributable to the accruing dividend in these events. This argument is much weaker if the liquidation and redemption sections expressly refer to the amount defined in the accruing dividend section, without referring to it as a "dividend."
