Auction-Rate Preferred Stock

auction-rate preferred stock

A type of floating-rate preferred stock for which dividend payments are determined at periodic auctions conducted by the issuer rather than by short-term interest rates. Compare remarketed preferred stock.

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Auction-Rate Preferred Stock

A preferred stock with an adjustable dividend that changes every seven weeks according to the results of a Dutch auction. Every preferred stock has a guaranteed dividend; what distinguishes an auction rate preferred stock is the fact that the amount of its dividends changes from time to time. An auction rate preferred stock is beneficial for some investors because the auction reveals the current market yield every seven weeks, which helps in investment decisions on whether to buy, sell, or hold. It is also called an auction market preferred stock.