convertible adjustable preferred stock

Convertible adjustable preferred stock (Caps)

The interest rate on caps is adjustable and is pegged to Treasury security rates. They can be exchanged at par value for common stock or cash after the next period's dividend rates are revealed.

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Convertible Adjustable Preferred Stock

A preferred stock that pays a dividend tied to U.S. Treasury securities. CAPS are convertible to common stock at par value at any time, especially after profits are announced but before dividends are paid. CAPS have the advantage of protecting the investor's principal while also allowing him/her to take advantage of upswings in the company's value.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

convertible adjustable preferred stock (CAPS)

Preferred stock with a dividend tied to rates paid by U.S. Treasury securities. CAPS can be converted to cash or shares of stock when the following period's dividend is announced, a feature that adds liquidity and protects principal.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.