Adjustable-Rate Preferred Stock - ARPS

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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.

INVESTOPEDIA EXPLAINS '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 is the difference between preferred stock and common stock?

    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's ... Read Full Answer >>
  2. Can preferred stocks be traded like common stocks? Are their prices the same?

    First, let's look at the differences and similarities between common stocks and preferred stocks. Both represent a piece ... Read Full Answer >>
  3. What is the difference between a hostile takeover and a friendly takeover?

    A hostile takeover occurs when one corporation, the acquiring corporation, attempts to take over another corporation, the ... Read Full Answer >>
  4. Why would a company issue preference shares instead of common shares?

    Preference shares, or preferred stock, act as a hybrid between common shares and bond issues. As with any produced good or ... Read Full Answer >>
  5. Why should a company buy back shares it feels are undervalued instead of redeeming ...

    Repurchase and redemption are associated with different classes of stock. Common shares can be bought back by the issuing ... Read Full Answer >>
  6. What are the types of share capital?

    Share capital refers to the funds a company receives from selling ownership shares to the public. A company that issues 1, ... Read Full Answer >>
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