What is stripped preferred stock characterized by?

Stripped preferred stock is characterized by a fixed redemption price and limited dividend participation. This type of stock is typically created by separating the dividend rights from the stock itself, thereby allowing the stockholder primarily to receive a predetermined return upon redemption rather than variable dividends.

The fixed redemption price signifies that the investor knows in advance the amount that can be expected when the stock is sold back to the issuer at maturity. This structure appeals to investors looking for a more secure return profile with predictable outcomes. Limited dividend participation means that the dividends, if paid, will not fluctuate significantly based on the company's profits, which aligns well with more conservative investment strategies.

In contrast, other choices reflect characteristics that do not align with the nature of stripped preferred stock. For instance, unlimited corporate growth participation implies a level of variable return typically associated with common stocks, which is not applicable here due to the fixed nature of stripped preferred stock returns. High risk due to market volatility may be more related to common stock investments rather than preferred stock, which is generally seen as a safer option in the capital structure. Lastly, preference in dividend payments based on company performance pertains more to traditional preferred stock varieties, which may offer a more variable payout depending on a company's financial health and decisions regarding profit distribution.