Non-cumulative preferred stock is preferred stock on which the dividends are not cumulative, meaning that dividends on the preferred stock that are not paid in a particular year "disappear" and do not need to be paid in subsequent years. However, dividends for the current year on the non-cumulative 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 non-cumulative preferred stock before paying any dividend to the common stock, but need not pay the $30 of dividends in arrears because the stock is non-cumulative.
The holders of non-cumulative preferred stock are potentially vulnerable because the board of directors can simply refuse to pay dividends for multiple years, retaining earnings within the corporation and enhancing the value of the common stock.
Non-cumulative preferred stock can be distinguished from cumulative preferred stock. Publicly issued preferred stock is usually cumulative. Privately issued preferred stock can be cumulative or non-cumulative.