Participating Preferred Stock

A type of preferred stock that, under certain conditions, gives holders the right to receive earnings payouts over and above the specified dividend rate.

Investopedia Commentary

Participating preferred stock is rarely issued, but one way in which it is used is as a poison pill. In this case, current shareholders are issued stock that gives them the right to buy more shares at a bargain price in the event of an unwanted takeover bid.

Related Links

Stock Basics Tutorial
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The Basics of Mergers and Acquisitions

See also: Convertible Preferred Stock, Poison Pill, Preferred Stock, Prior-Preferred Stock