One of the most attractive fixed-income investments introduced over the past two years is the preferred security. Developed in the early 1990s, preferred securities offer investors the opportunity to maintain good liquidity in portfolios and earn a higher income than they would if they invested in comparable corporate bonds and preferred stocks.
The securities, often known as TOPRs, MIPs, QUIPs and Trust Preferreds, are commonly purchased by individual investors who seek an affordable fixed-income investment to enhance their income stream without sacrificing credit quality. Preferred securities can offer these benefits because they possess the features of both corporate bonds and preferred stock.
The best of both worlds
Like corporate bonds, preferred securities offer the following benefits: