Legal Definitions - guaranty stock

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.