Preferred stock that allows repayment of a dividend under certain conditions is known as what?

The correct answer is cumulative preferred stock. Cumulative preferred stock is a type of preferred stock that includes a provision that requires any unpaid dividends to accumulate and be paid out to shareholders before any dividends can be distributed to common stockholders. This ensures that if a company is unable to pay dividends in a given year, it must make up for those missed payments in the future when it is financially able to do so.

This feature is crucial for investors seeking a stable income from their investments, as it provides a safety net in the event of financial downturns that might otherwise prevent dividend payments. In essence, cumulative preferred stock offers protection to shareholders by guaranteeing that they eventually receive all due dividends, reinforcing the priority of preferred shareholders over common shareholders.

Participating preferred stock, on the other hand, allows shareholders to receive additional dividends beyond the stated amount under certain conditions, typically linked to the company's performance. Convertible preferred stock gives investors the option to convert their shares into common shares at predetermined rates, while callable preferred stock allows the issuing company to repurchase the shares at a predetermined price after a certain date. None of these types include the accumulation feature, which is unique to cumulative preferred stock.