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. Accelerated Return Note (ARN)

    A short- to medium-term debt instrument that offers a potentially ...
RELATED FAQS
  1. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  2. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>
  3. What bond indexes follow the supply and demand for junk bonds?

    Bond indexes that track junk bonds include the Merrill Lynch High Yield Master II Index and the S&P U.S. High Yield Corporate ... Read Full Answer >>
  4. Who or what is backing municipal bonds?

    Municipal bonds are backed by dedicated taxes or revenue sources related to specific projects, or by the full faith and credit ... Read Full Answer >>
  5. What are the differences between debt and equity markets?

    The basic differences between the debt and equity markets include the type of financial interest they represent, the way ... Read Full Answer >>
  6. What do cities do with the funds generated from municipal bonds?

    Funds generated from the sale of municipal bonds may go to provide for unspecified, general government financial needs, or ... Read Full Answer >>
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. Mutual Funds & ETFs

    ETF Analysis: iShares Barclays Aggregate Bond

    Explore information and analysis about the iShares Core U.S. Aggregate Bond ETF that offers broad exposure to the U.S. government and corporate bond market.
  8. Investing

    Short-Term Funds or Fixed Deposits: Is One Better?

    Choosing between short-term funds and fixed deposits? Here's what you need to know.
  9. Fundamental Analysis

    Present Value Interest Factor of Annuity (PVIFA)

    PVIFA can be used to calculate the present value of a series of annuities by considering cash flows and depreciation.
  10. Mutual Funds & ETFs

    ETF Analysis: Vanguard Total Bond Market

    Learn about the Vanguard Total Bond Market exchange-traded fund, its primary portfolio holdings and risk/reward profile based on its past performance.

You May Also Like

Hot Definitions
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  2. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  3. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  4. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  5. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  6. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!