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Simple English definitions for legal terms
guaranteed stock
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A quick definition of guaranteed stock:
Guaranteed stock is a type of stock that promises to pay a dividend to the shareholder no matter what. This means that even if the company doesn't make a profit, the shareholder will still get paid. It's like a guarantee that the shareholder will receive some money.A more thorough explanation:
Guaranteed stock is a type of preferred stock that guarantees a dividend payment by someone other than the issuer, usually a parent corporation. Preferred stock is a class of stock that gives its holder a preferential claim to dividends and corporate assets upon liquidation, but usually carries no voting rights.
Example: Company A issues preferred stock to its shareholders, but the dividend payment is guaranteed by Company B, which is the parent corporation of Company A. This means that even if Company A is unable to pay the dividend, Company B will step in and make the payment.
This example illustrates how guaranteed stock provides an additional layer of security for investors, as they are assured of receiving their dividend payment even if the issuing company is unable to make the payment.