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
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    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's ... Read Full Answer >>
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    First, let's look at the differences and similarities between common stocks and preferred stocks. Both represent a piece ... Read Full Answer >>
  3. Is a company's paid in capital affected by the trading of its shares in the secondary ...

    The amount of paid-in capital a company has is not affected by the trading of its shares on the secondary market. Paid-in ... Read Full Answer >>
  4. Why is the value of capital stock important to public shareholders?

    The value of a company's capital stock is important to public shareholders, because a company's capital stock represents ... Read Full Answer >>
  5. How do changes in capital stock illustrate the overall health of a company?

    Changes in capital stock normally illustrate that the overall health of a company is strong, and that it is seeking to raise ... Read Full Answer >>
  6. What is the difference between Class A shares and other common shares of company's ...

    The difference between Class A shares and other common shares of a company’s stock is usually the amount of voting rights ... Read Full Answer >>
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