Which of the following is not a characteristic of convertible securities?

Convertible securities are unique financial instruments that combine features of both debt and equity. They can be exchanged for a predetermined number of shares of common stock, which is a defining characteristic of these securities. This feature allows investors to benefit from potential equity upside while initially receiving fixed income like traditional bonds.

The statement about convertible securities typically having a higher yield than regular bonds is inaccurate because convertible securities often have a lower yield compared to non-convertible bonds. This lower yield compensates for the additional option value that the conversion feature provides to investors.

Convincing dividends are not guaranteed with convertible securities. Typically, these securities might not offer dividends at all, or if they do, they may be less than what one would expect from common stock or even standard bonds. The price of convertible securities often reflects their conversion options rather than fixed income returns.

Companies commonly issue convertible securities as a way to raise capital. This is especially prevalent in the case of firms looking to attract investment without immediately diluting their equity base. Since these securities can convert to equity in the future, they allow companies to defer the potential dilution of current shareholders until the conversion occurs.

Thus, the characteristic that does not apply to convertible securities is that they guarantee dividends, as the dividend payments can be inconsistent