What are high-yield securities?
High-yield securities are a special breed of investment that is viewed by both analysts and investors as riskier than securities issued by companies with the strongest balance sheets or otherwise higher credit ratings. There are three main types of high-yield investments: 1. High-yield bonds 2. Leveraged (or “floating rate”) loans, and 3. Leveraged company stock (equity in companies that issue non-investment-grade debt or have a leveraged capital structure). Credit-rating agencies—such as Standard and Poor’s, Moody’s, and Fitch Ratings—evaluate the ability of public companies, governments, and other borrowers to make income and principal payments to their debt-holders. The debt of those organizations best prepared to do so is rated “investment-grade” (BBB and higher), while the debt of those organizations most vulnerable to default is rated “non-investment-grade” (BB and lower). Distressed companies and leveraged companies—due in large part to their relatively high ratio of debt to equ
What are high-yield securities?