Types of Preferred Stock If a corporation's board of directors decides not to pay dividends to preferred stockholders, holders of this type of preferred stock must be paid the previously skipped dividends before any future dividends are distributed to common stockholders. Convertible preferred stock Cumulative preferred stock If a corporation's board of directors decides not to pay dividends to preferred stockholders, holders of this type of stock have no claim to the previously skipped dividends. However, when dividend payments resume, preferred shareholders must receive the guaranteed dividend payments before common shareholders receive dividend payments. Noncumulative preferred stock This type of preferred stock can be exchanged, at the option of the stockholder, for a specified number of shares of common stock