Cumulative preferred stock is preferred stock on which the dividends are cumulative, meaning that all current and past unpaid dividends on the preferred stock must be paid before any dividend may be paid on common stock.
As an example, consider $100 of preferred stock paying a 10% dividend that has been oustanding for three years but never paid a dividend. In the fourth year, the board of directors must pay $10 to the preferred stock before paying any dividend to the common stock, whether the preferred is cumulative or not. If, however, the preferred is cumulative, however, the board must pay the $30 of dividends in arrears together with the $10 current dividend in order to pay a dividend on the common stock.
Cumulative preferred stock can be distinguished from non-cumulative preferred stock. Publicly issued preferred stock is usually cumulative. Privately issued preferred stock can be cumulative or non-cumulative.