Fixed-Rate Capital Securities

DEFINITION of 'Fixed-Rate Capital Securities'

A security issued by a corporation that has a $25 par value (although some are issued with a $1,000 par value) and offers investors a combination of the features of corporate bonds and preferred stock. These securities provide the benefits of attractive yields, fixed monthly, quarterly or semiannual income, investment time frames that are generally predictable (20-49 years, although some are perpetual), liquidity and investment-grade credit quality (in most cases).

BREAKING DOWN 'Fixed-Rate Capital Securities'

Unlike common and preferred stock dividends, the distributions made on fixed-rate capital securities are fully tax-deductible for the issuer, just like the interest payments on traditional debt instruments. Rating agencies have taken a positive view of this financing tool for the issuer, because it provides long-term capital and permits the deferral of payments should the issuer experience financial difficulties. However, as with preferred stock, such deferrals can only occur if the parent company stops all other stock dividend payments.

RELATED TERMS
  1. Par

    Short for "par value," par can refer to bonds, preferred stock, ...
  2. Full Stock

    A stock with a par value of $100 per share. A full stock issue ...
  3. Half Stock

    Stock sold with a par value half of what is considered standard. ...
  4. Purchase Fund

    A feature of some bond indentures and preferred stock that requires ...
  5. Taxable Preferred Securities

    A type of preferred equity security that does not qualify for ...
  6. Quarterly Income Preferred Securities ...

    Shares that are an interest in a limited partnership that exists ...
Related Articles
  1. Bonds & Fixed Income

    Explaining Original Issue Discount

    An original issue discount is the amount below par at which a bond or other debt instrument is issued.
  2. Fundamental Analysis

    Valuation Of A Preferred Stock

    Determining the value of a preferred stock is important for your portfolio. Learn how it's done.
  3. Bonds & Fixed Income

    Understanding Face Value

    Face value is the dollar value stated on a security.
  4. Retirement

    Bond Basics: Characteristics

    Bonds have a number of characteristics of which you need to be aware. All of these factors play a role in determining the value of a bond and the extent to which it fits in your portfolio. Face ...
  5. Mutual Funds & ETFs

    Top 6 Preferred Stock ETFs

    A list of top ETFs which invest in preferred stocks and pay regular dividend income
  6. Bonds & Fixed Income

    Simple Math for Fixed-Coupon Corporate Bonds

    A guide to help to understand the simple math behind fixed-coupon corporate bonds.
  7. Investing

    Advising FAs: Explaining Bonds to a Client

    Most of us have borrowed money at some point in our lives, and just as people need money, so do companies and governments. Companies need funds to expand into new markets, while governments need ...
  8. Mutual Funds & ETFs

    The True Risks Behind Preferred Stock ETFs (PFF, FPE)

    Consider the risks of investing in preferred stocks, including lack of diversification and sector risks in preferred stock ETFs.
  9. Options & Futures

    20 Investments: Preferred Stock

    What Is It? Preferred stock represents ownership in a company, but it usually does not give the holder voting rights (this may vary depending on the company). With preferred shares, investors ...
  10. Bonds & Fixed Income

    Lookin’ for Yield in All the Right Places

    Why is that in a world of low and in some cases negative interest rates, investors continue to struggle to find yield? Read on.
RELATED FAQS
  1. Why would a stock have no par value?

    People often get confused when they read about the "par value" for a stock. One reason for this is that the term has slightly ... Read Answer >>
  2. What is the difference between par value and market value?

    Learn about the difference between the par value and market value of financial securities, including the role they play in ... Read Answer >>
  3. What is the difference between par and no par value stock?

    Understand the difference between par and no par value stock and how this differentiation affects corporate liabilities and ... Read Answer >>
  4. Are corporations required to state the par value of their stock?

    Find out when companies are required to state the par value of stock and why it is beneficial to businesses and shareholders ... Read Answer >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center