What is the bank dividend stopper?

This term describes the repercussions for investors in the event that the issuer ceases to make the stated income payments to holders of the capital trust securities. Each date that the interest payment is not paid results in what is termed a deferral event. The dividend stopper feature will describe the potential events that will unfold if the trust does not make its interest payments. The outcome could be as simple as capital trust investors receiving deferral preferred shares in place of cash or as complicated as the bank ceasing all dividend payments on its outstanding preferred and common shares, until the trust reinstitutes the indicated interest payments. The strength of the dividend stopper feature will help investors to assess the issuer’s incentive to ensure all interest payments are made.

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