23 Hybrid Securities Your company is considering the issue of a security that pays a fixed dividend for 20 years, at which point the security will cease to exist. If your firm can’t afford to pay the dividend in any year, the dividend will cumulate to the next year so that two dividends must be paid. The security has seniority to ordinary equity, meaning that no dividends can be paid to ordinary shareholders until all outstanding dividends are paid to the hybrid security’s shareholders. Is this security equity or debt? How would you treat this in the company’s balance sheet and income statement?