Non Cumulative Dividend Law and Legal Definition

Non cumulative dividend is a dividend on preferred stock which does not cumulate upon omission of payment so as to require payment of a passed or omitted dividend of one year out of earnings of a following year. A non cumulative dividend once passed or omitted is dead. It can never be made up or it does not accrue for the benefit of a preferred shareholder.

“Where the directors did not abuse their discretion in withholding dividends on the non-cumulative preferred stock for any past years, no right survived to have those dividends declared, and the directors had no discretion whatever to declare those dividends subsequently.” [Guttmann v. Illinois C. R. Co., 189 F.2d 927 (2d Cir. 1951)]