What Is Participating Preferred Stock?

Participating preferred stock is a form of preferred stock that entitles the bearer to dividends equal to the generally set rate at which preferred dividends are paid to preferred shareholders, as well as a bonus dividend provided certain conditions are met. Liquidation preferences can be set for participating preferred shares in the case of a liquidation event.
Participating in preferred stock is uncommon, although it can be used as part of a poison pill plan in reaction to a hostile takeover offer.

Participating Preferred stock is a form of preferred stock which receives a dividend before any common stockholders and receive preference over common stock in the event of liquidation.

Participating preferred stock is preferred stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation. This form of financing is used by private equity investors and venture capital firms.