Guaranteed Stock


DEFINITION of 'Guaranteed Stock'

An infrequently used form of common or preferred stock, whose dividends are guaranteed by a third party. Railroads and public utilities sometimes issue this kind of stock. The guaranteed dividend can increase the stock's price.

This can also refer to commonly purchased items that a company always keeps a supply of for customers to purchase.

BREAKING DOWN 'Guaranteed Stock'

A company cannot pay dividends unless it earns a profit. Since it can't guarantee that it will earn a profit, another company has to guarantee that it will pay the dividend.

By having guaranteed stock, a company can acquire an advantage over competitors who do not. However, it will face the costs associated with carrying a large amount of inventory.

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