Monthly Income Preferred Securities

Monthly Income Preferred Securities (MIPS)

A type of preferred stock issued by a special-purpose partnership with the intent of lending the proceeds of the stock issue to a corporate parent. Interest received by the partnership is used to pay dividends to the preferred stockholders. The relatively complicated structure of such a stock issue provides a tax deduction to the corporate parent, which pays interest rather than dividends. MIPS offer higher yields than regular preferred stock and can generally be redeemed in five years.

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Monthly Income Preferred Securities

Preferred stock representing a portion of ownership in a limited partnership. The limited partnership is a subsidiary of another company and exists only for the purpose of issuing the MIPS. The proceeds from MIPS are lent to the partnership's parent company. These securities thus combine aspects of stocks and bonds; they mature on a monthly basis and usually have a par value of $25. Returns on MIPS come out of the partnership's pretax earnings.