HopefullyInLawSchool
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LSDefine
Simple English definitions for legal terms
guaranty stock
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A quick definition of guaranty stock:
Guaranty stock is a type of stock that a savings-and-loan association issues to its shareholders. It pays dividends to the holders after dividends have been paid to the depositors. This means that if you own guaranty stock, you will receive a portion of the profits made by the association after it has paid its depositors.A more thorough explanation:
Guaranty stock is a type of preferred stock that guarantees a dividend payment by someone other than the issuer, usually a parent corporation. It is a type of equity security issued by a corporation.
Example: ABC Corporation issues guaranty stock to its shareholders, which guarantees a dividend payment by its parent company XYZ Corporation. This means that even if ABC Corporation does not make a profit, the shareholders will still receive a dividend payment from XYZ Corporation.
This example illustrates how guaranty stock provides a safety net for shareholders, ensuring that they receive a dividend payment even if the issuing corporation does not make a profit.