A preferred stock whose dividend is readjusted at specified periods based, for example, on the maximum of a set of short- and long-term rates plus or minus a prespecified spread. Variable-rate preferred stocks are unlike standard preferred stocks which pay fixed quarterly dividends. However, prices of variable-rate preferred stocks don’t fluctuate much because their dividends are automatically reset to keep the shares selling near to par.
It is also referred to as a floating-rate preferred stock, an adjustable rate preferred stock, a cumulative auction market preferred stock, and a Dutch auction rate transferable securities preferred stock.
