Income Participating Security - IPS

AAA

DEFINITION of 'Income Participating Security - IPS'

A security that comprises a common share and a high-yield bond packaged together to distribute an issuer's cash flow to investors in a tax-efficient manner. An income participating security generally trades on an exchange, and its two components can be separated later and traded individually. The cash flow to investors consists of dividends from the common share component and interest payments from the bond component.

Also referred to as an "income deposit security" or an "enhanced income security".

INVESTOPEDIA EXPLAINS 'Income Participating Security - IPS'

Income participating securities were designed to distribute high levels of cash flow to American and Canadian investors in U.S. companies, similar to the former Canadian income trusts. However, while IPSs and Canadian income trusts had similar objectives as far as these investors were concerned, IPSs have a legal structure that differs from that of income trusts. Potential issuers of IPSs are those with stable cash flows, limited capital expenditures and low growth prospects in mature industries.

RELATED TERMS
  1. Specified Investment Flow-Through ...

    A tax implemented by the Canadian government on the distributions ...
  2. Income Trust

    An investment trust that holds income-producing assets and trades ...
  3. Income Deposit Security - IDS

    A security that combines common stock and notes of the issuer ...
  4. Real Estate Investment Trust - ...

    A security that sells like a stock on the major exchanges and ...
  5. Canadian Income Trust

    A type of corporate structure as designated by the Canada Revenue ...
  6. Surrender Period

    The amount of time an investor must wait until he or she can ...
Related Articles
  1. Investing

    Build A Dividend Portfolio That Grows With You

    Balance risk and return to produce adequate income despite inflation.
  2. Budgeting

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.
  3. Mutual Funds & ETFs

    Income Funds 101

    Income funds don't have to be bonds, there are plenty to choose from. Read up on the types of income funds and whether they fit your investment needs.
  4. Options & Futures

    An Introduction To Reverse Convertible Notes (RCNs)

    When stocks are stagnant and fixed-income yields are crumbling, RCNs come to the rescue!
  5. Bonds & Fixed Income

    Retail Notes: A Simpler Alternative To Bond Funds

    These securities are meant to be held until maturity, removing the burden of complex pricing that sometimes plagues bonds.
  6. Markets

    Your Dividend Payout: Can You Count On It?

    We go over several telling factors that can help you answer this question and avoid losses.
  7. Bonds & Fixed Income

    How does face value differ from the price of a bond?

    Discover how bonds are traded as investment securities and understand the various terms used in bond trading, including par value, market price and yield.
  8. Bonds & Fixed Income

    Why is my bond worth less than face value?

    Find out how bonds can be issued or traded for less than their listed face values, and learn what causes bond prices to fluctuate in the secondary market.
  9. Trading Strategies

    How long will it take for a savings bond to reach its face value?

    Learn essential information about U.S. savings bonds along with an explanation of the unique characteristics of this popular investment instrument.
  10. Bonds & Fixed Income

    When are treasury bills best to use in a portfolio?

    Understand the role that U.S. Treasury bills can play in an investment portfolio and why they represent one of the most liquid and secure debt obligations.

You May Also Like

Hot Definitions
  1. Multiplier Effect

    The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends ...
  2. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  3. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  4. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  5. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  6. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
Trading Center