Adjustable Rate Preferred Stock:
This post is designed to provide the reader with general information concerning what an adjustable rate preferred stock is. Please keep in mind that this information is being provided for informational purposes only and is not designed to be complete in all material respects. Thus, it should not be relied upon as providing legal or investment advice. If you have any questions concerning this post or its contents, you should seek a qualified professional.
An “adjustable rate” preferred stock) (also called variable rate or floating rate preferreds) is a preferred stock whose dividend is adjusted, usually quarterly, as opposed to paying a fixed return, based on changes in the Treasury bill rate or other identified money market rate. The market prices of adjustable rate preferreds are usually less volatile than fixed rate preferreds.
The exact terms of preferred stock is usually set forth in a written document establishing the preferred stock sometimes called a “designation of terms and preferences.” Prior to investing in any preferred stock, the investor should be fully aware of all of the terms and conditions of the preferred security.