Fixed-Rate Capital Security

Fixed-Rate Capital Security

A security that combines features of bonds and preferred stock. Fixed-rate capital securities provide the holder with a fixed coupon with payments on a regular basis, and like bonds, these coupons are tax deductible for the issuer. Likewise, most have a maturity date and are fairly liquid. 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 all dividend payments on stock. Because of these features, fixed-rate capital securities are fairly low risk investments.