A security that operates like a combination of preferred stock and corporate bond. It normally has a par value set at $25. This type of financing has become fairly common among utility companies. The advantage for the company issuing these securities is that the periodic fixed rate distribution payments are fully tax deductable and can be deferred if needed. However, these payment deferrals can only occur if all stock dividends cease first.
Related information about fixed-rate capital securities:
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However, like preferred stock, the issuer may suspend payments on fixed-rate capital securities when it is having cash flow problems, though only if it also stops ...