What rights do cumulative stockholders have regarding unpaid dividends?

Cumulative stockholders have the right to receive unpaid dividends that have been accrued in prior years before any dividends can be distributed to common stockholders. This means that if a corporation has not paid dividends in previous years, cumulative preferred stockholders can claim those unpaid dividends when the company does declare dividends in the future.

The correct choice reflects the principle that cumulative stockholders are entitled to receive any outstanding dividends from prior periods—as long as they are still due—before the company can distribute dividends to other stockholders. This right is essential in protecting the interests of cumulative preferred stockholders, as it ensures they are compensated for any missed dividend payments as a priority.

The other options suggest limitations or misinterpret the fundamental aspects of cumulative stock. For instance, the idea that they can only receive future dividends ignores their rights to claim past unpaid dividends. Similarly, claiming a restriction such as being limited to unpaid dividends in only the past three years or implying that they have no rights to unpaid dividends contradicts the core essence of cumulative preferred stockholders' rights. Therefore, recognizing the scope and intent of cumulative preferred stock enables a better understanding of the protections it grants to shareholders.