What is a common feature of cumulative preferred stock?

Cumulative preferred stock is characterized by its accumulation feature, which means that if a company fails to pay dividends in any given period, those unpaid dividends are carried forward. This means that before any dividends can be distributed to common stockholders, all accrued dividends due to cumulative preferred shareholders must be paid first. This feature provides a layer of security for investors, ensuring that they will eventually receive the dividends owed to them, even if the company faces financial difficulties in a particular year.

The other options do not accurately reflect the unique characteristics of cumulative preferred stock. For instance, cumulative preferred stock does not necessarily pay dividends based on market rates, nor does it typically allow for conversion to common stock; it also maintains specific rights regarding dividend payments rather than lacking repayment rights entirely. This makes the choice that identifies the accumulation of unpaid dividends the most accurate description of a common feature of cumulative preferred stock.