Participating preferred stock is distinguished by what feature?

Participating preferred stock is recognized for its unique feature of providing shareholders the opportunity to receive additional dividends beyond the fixed dividend rate. This typically occurs when the company meets specific financial performance goals or exceeds a certain threshold of profit.

In practical terms, if a company declares dividends to common shareholders that exceed the set dividend for preferred shareholders, those with participating preferred stock benefit from these extra earnings. Essentially, this allows for a potentially higher overall yield on their investment if the company's performance is strong. This characteristic is what primarily distinguishes participating preferred stock from other types of preferred or common stock, making it an attractive option for investors looking for both stability and potential upside in dividend payments.

Other options do not capture this unique advantage of participation in additional dividends tied to company performance, therefore failing to highlight the essence of what participating preferred stock offers.