Terms

Series

5.95% Non-Cumulative Perpetual Preferred Stock, Series D

Liquidation Preference

$25.00

Coupon Rate

5.95%

Rate Type

Fixed

Annual Dividend

$1.49

Payment Frequency

Quarterly

Cumulative

No

Perpetual

Yes

Convertible

No

Callable

Yes

First Call Date

June 1, 2021

First Call Price

$25.00

Capital Stack Ranking

Junior To: All Existing And Future Debt Obligations Of Csc, Any Future Senior Preferred Stock Series; Pari Passu With: Series A Preferred Stock (Fixed-To-Floating Rate Non-Cumulative Perpetual Preferred Stock), Series B Preferred Stock (6.00% Non-Cumulative Preferred Stock), Series C Preferred Stock (6.00% Non-Cumulative Preferred Stock); Senior To: Common Stock, Any Other Junior Stock

Regulatory (Basel III) Call

Yes

Tax Classification

Qualified Dividend

Qualifies for QDI

Yes

Qualifies for DRD

Yes

Depositary Share Fraction

0.025

Shares Offered

30,000,000

Prospectus Summary

The Charles Schwab Corporation (CSC), a savings and loan holding company headquartered in San Francisco, is offering 30,000,000 depositary shares, each representing a 1/40th interest in a share of its 5.95% Non-Cumulative Perpetual Preferred Stock, Series D, with a liquidation preference of $25 per depositary share and a first optional call date of June 1, 2021. The fixed 5.95% coupon generates $1.4875 annually ($0.371875 per quarter) per depositary share. Critically, dividends are non-cumulative: if the board omits a quarterly dividend, that payment is permanently lost and cannot be made up in future periods, creating meaningful income uncertainty for holders. The Series D Preferred sits above CSC's common stock and ranks pari passu with its existing Series A (Fixed-to-Floating), Series B (6.00%), and Series C (6.00%) preferred series. It is junior to all of CSC's existing and future debt ($2.9 billion in long-term debt as of year-end 2015) and, because CSC is a holding company that operates primarily through subsidiaries such as Charles Schwab Bank, it is also effectively subordinated to all liabilities of those subsidiaries. A regulatory capital treatment event call allows CSC to redeem the entire issue within 90 days if a change in law or regulation causes the Series D to lose its additional Tier 1 capital status under Federal Reserve rules — a meaningful risk given evolving Basel III implementation. At the $25 offering price, the effective yield at par is 5.95%. For non-corporate U.S. holders meeting the 60-day minimum holding period, dividends should qualify as 'qualified dividend income' taxed at preferential rates (maximum 20%); U.S. corporations should qualify for the 70% dividends-received deduction under similar holding period rules. Dividends are payable quarterly on March 1, June 1, September 1, and December 1, with the record date fixed at the 15th calendar day prior to each payment date. The dividend stopper blocks CSC from paying any dividends on common stock or repurchasing junior securities if full Series D dividends were not paid in the prior period — providing some indirect protection but not a guarantee of payment.

Summarized from the SEC prospectus filing.

Distribution History

Ranking vs. Other Preferreds

Dividend Stopper Provisions

Dividend Stopper Description

If Schwab fails to pay full dividends on the Series D Preferred Stock for any preceding dividend period, it may not pay dividends on or repurchase common stock or other junior securities (with limited exceptions), and may not repurchase parity stock except on a pro rata basis.

Other Preferreds from Charles Schwab Corp

Div Score Breakdown

Reinvesty's multi-factor safety analysis for this preferred, composite score: 68 (Strong)