Cumulative vs non-cumulative preferred stock

Every preferred stock has a rule for what happens when the issuer does not pay a scheduled dividend. Under a cumulative structure the unpaid amount carries forward and stays owed. Under a non-cumulative structure it is simply not paid. This guide explains the difference and shows which digital credit instruments use each, based on their filings as of 22 October 2026. It describes contract terms and is not investment advice.

Dividends are declared, not owed by default

For any preferred stock, a dividend becomes payable only when the board declares it. That holds for both structures. The difference is what happens if the board does not declare:

• Cumulative: the dividend accrues. The issuer cannot pay dividends on junior stock (for example, common stock) until the arrears are cleared, and accumulated amounts are added to what holders receive on a redemption, a fundamental change repurchase or a liquidation.
• Non-cumulative: the dividend for that period lapses. Nothing accrues and holders have no claim to it later.

Neither structure makes the dividend a debt. A missed preferred dividend is not a default in the way a missed bond coupon is.

Which instruments are which

Instrument	Issuer	Cumulative?	Treatment of unpaid amounts
STRF	Strategy	Yes	Compounds quarterly at the regular rate + 100bp, rising 100bp per period (cap not confirmed here)
STRC	Strategy	Yes	Accumulates; no rate cut allowed while unpaid
STRE	Strategy	Yes	Compounds quarterly at 10% + 100bp, rising 100bp per period, max 18%
STRK	Strategy	Yes	Accumulates
STRD	Strategy	No	Nothing accrues
SATA	Strive	Yes	Compounds monthly at the regular rate + 25bp, rising 25bp per month, max 20%
SATS	Strive	Yes	Summary says nothing accrues on unpaid dividends (check full text)
MORE	Smarter Web Company	Yes (per company)	Not confirmed from the prospectus

Sources: certificates of designations for STRF, STRC, STRE, STRK, STRD; SATA prospectus supplement; SATS 8-K, 20 October 2026; Smarter Web Company Quarterly Investor Update, 1 October 2026.

How compounding works on arrears

Several cumulative series go further than simple accumulation: unpaid amounts earn their own dividend at a rate that rises the longer they stay unpaid.

Take STRE as an example from its certificate of designations. The regular rate is 10% a year on €100. If a quarterly dividend is missed, the unpaid amount compounds at 11% (10% plus 100 basis points). If the next one is also missed, the compounding rate rises another 100 basis points, and so on until it reaches 18%. The step-up is a penalty that increases the issuer's cost of leaving dividends unpaid.

SATA has a similar mechanism on a monthly cycle, stepping up 25 basis points per month to a maximum of 20%, according to its prospectus supplement.

SATS is less clear. The 8-K summary of its certificate says dividends accumulate but that no further amount accrues on unpaid regular dividends, while its liquidation clause refers to compounded dividends (8-K). Readers should check the full certificate.

STRD: the non-cumulative case

STRD pays a 10.00% fixed rate on $100, quarterly. Its certificate of designations states that Strategy has no obligation to pay undeclared dividends and that nothing accrues on them (8-K, 10 June 2025). STRD also ranks last of Strategy's five preferred series.

Two consequences follow from the terms:

1. Missed income is permanent. If Strategy skips a STRD dividend, holders do not receive it later, even if the company later resumes payments.
2. Less protection for junior-stock restrictions. With cumulative stock, the issuer must clear all arrears before paying junior stock. With non-cumulative stock, restrictions on junior payments generally apply only to the current period. The precise wording varies and is set out in the certificate.

On redemption or a fundamental change repurchase, STRD holders receive the stated amount or liquidation preference plus declared and unpaid dividends, rather than accumulated dividends as for the cumulative series.

All STRD dividends scheduled since its issue have been declared, including the 30 September 2026 payment of $2.50 per share (8-K, 31 August 2026). That is a record of past payments, not a term of the security.

Why an issuer would offer non-cumulative stock

From the issuer's side, non-cumulative stock gives more flexibility: dividends can be skipped without building up an obligation. Holders are typically compensated through price or rate. STRD was first issued at $85 on 10 June 2025, compared with STRF at $85 on 25 March 2025, both carrying a 10.00% rate (10-Q). Any difference in trading price between the two reflects ranking, cumulative status and other factors together, not cumulative status alone.

Cumulative is not the same as senior

Cumulative status and seniority are separate. A cumulative series can still rank behind other series. STRK is cumulative but ranks fourth of five in Strategy's preferred stack; STRD is non-cumulative and ranks fifth. Seniority determines who is paid first when cash is limited; cumulative status determines whether a missed payment survives. The capital stack guide covers ranking.

What to check in the filing

• Whether the certificate describes dividends as cumulative or non-cumulative.
• What accrues on unpaid amounts, the step-up rate and any cap.
• The "dividend blocker" clause: what the issuer may not pay on junior stock while dividends are unpaid.
• Whether redemption and repurchase prices include accumulated or only declared dividends.
• Any voting or board-appointment rights triggered by missed dividends.