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).

Investopedia explains '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.



comments powered by Disqus
Hot Definitions
  1. Marginal Analysis

    An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.
  2. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed.
  3. Gilt-Edged Switching

    The selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bond issued by a financially stable company such as the Blue Chip companies or by certain governments.
  4. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.
  5. Class Action

    An action where an individual represents a group in a court claim. The judgment from the suit is for all the members of the group (class).
  6. Retail Sales

    An aggregated measure of the sales of retail goods over a stated time period, typically based on a data sampling that is extrapolated to model an entire country. In the U.S., the retail sales report is a monthly economic indicator compiled and released by the Census Bureau and the Department of Commerce.
Trading Center