Preferred stock paying high monthly dividends have always caught my attention. Consider this one: Magnum Hunter Res Del PFD C . Yeah now that’s a mouthful but it translates into Magnum Hunter Resourses Delvelopment Preferred Cumulative.
Now other than the fact that this outfit pays a monthly dividend with a yield of 10.25% which of course caught my eye; it offers this preferred stock with an additional feature. Yep, its cumulative. See definition:
“Cumulative A preferred security with a cumulative feature requires a company to make a dividend or interest distribution to shareholders of that security before any other distributions can be made to common shareholders. When a company fails to make a dividend or interest payment to preferred shareholders, the past omitted payments accrue and are paid in a future payment to a cumulative preferred shareholder before distributions can be made to any common shareholders.”
This cumulative aspect recently came into play when the company’s stock price took a nosedive and it stopped paying the monthly dividends for five months. Bummer, right? Wrong my friend. Now the stock price has rebounded and guess what? That magic cumulative word kicked in and the next dividend includes all the omitted monthly dividends. Cool.
This just goes to show you that you ought to know what all those letters stand for when you purchase a preferred stock.
Magnum Hunter is an exploration and production company in the crude oil and natural gas sector and they are active in the major shale resource plays in North America. And I own shares in this company. whoopie.