What defines the dividend structure of a participating preferred stock?

The correct answer is that the dividend structure of a participating preferred stock is defined by having a minimum but not a maximum.

Participating preferred stock typically guarantees its shareholders a minimum dividend, providing some level of income assurance. This minimum ensures that investors will receive a certain amount of return on their investment, regardless of the company’s performance.

This type of stock, however, allows holders to participate in additional dividends beyond the minimum level if the company performs well, having excess earnings available for distribution. Therefore, while there is a guaranteed minimum return, there isn’t a cap on the additional dividends, meaning that investors stand to gain more when the company's profits increase substantially.

This structure is appealing to investors because it provides a stable income stream with the potential for greater rewards if the company excels financially. Other configurations, such as having a maximum or not defining limits at both ends, do not accurately represent the typical format of participating preferred stocks.