Adjustable-Rate Preferred Stock - ARPS

DEFINITION of 'Adjustable-Rate Preferred Stock - ARPS'

A type of preferred stock where the dividends issued will vary with a benchmark, most often a T-bill rate. The value of the dividend from the preferred share is set by a predetermined formula to move with rates, and because of this flexibility preferred prices are often more stable then fixed-rate preferred stocks.

BREAKING DOWN 'Adjustable-Rate Preferred Stock - ARPS'

The preferred category of stocks are more secure as they will be one of the first of the equity holders to receive dividend payments in the event of the company's liquidation. There is often a limit to the amount the rate can change on the dividend, adding further security to the issue.

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RELATED FAQS
  1. What are some examples of preferred stock, and why do companies issue it?

    Understand the difference between preferred stock and common stock, and learn the primary reasons why companies issue preferred ... Read Answer >>
  2. What is common stock and preferred stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ... Read Answer >>
  3. How are preferred stock dividends taxed?

    Discover the intriguing debt and equity characteristics of preferred stock, and learn about how preferred stock dividends ... Read Answer >>
  4. Why do preferred stocks have a face value and why is it different than market value?

    Read about the differences between the face value and market value of a preferred stock, including why preferred stocks often ... Read Answer >>
  5. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference shares and why investors might value them more than common ... Read Answer >>
  6. How does preferred stock differ from company issued bonds?

    Discover the primary differences between preferred stock and corporate bonds, two income-generating investment vehicles issued ... Read Answer >>
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