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Definition: Monthly Income Preferred Securities – MIPS
Monthly Income Preferred Securities refer to the hybrid securities which are known for the features of both preferred stock and corporate bonds. Hybrid Securities generally pay a higher rate of return as compared to both preferred stock and corporate bonds as the dividends are paid with pretax dollars rather than post tax dollars. This also generates a considerable amount in the form of tax break for various corporations.
Generally Monthly Income Preferred Securities have a $25 par value. They are listed on New York Stock Exchange and have cumulative monthly distributions. Usually Monthly Income Preferred Securities refer to the shares of a limited liability company. The limited liability company which is a part of the parent company exists solely for the purpose of issuing preferred securities. The limited liability company then lends the proceeds of the sales to the parent company.
So the intent of the special purpose partnership is to lend the proceeds of the sale to the parent company. The main reason for higher yield in case of Monthly Income Preferred Securities is that they give interest rather than dividends.
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