What does the term 'callable' refer to in stock investments?

The term 'callable' in stock investments refers to the ability of a security, particularly bonds or preferred stocks, to be redeemed or retired by the issuer before its maturity date. When a bond or preferred stock is callable, the issuer can choose to buy back the security at a predetermined price after a specified date.

This feature can be advantageous for the issuer, as it allows them to refinance debt if interest rates decline or to adjust their capital structure as needed. For investors, this means that they face the risk of having their investment called away before maturity, potentially affecting their expected return.

The other options do not accurately represent the concept of callable securities. Being exchanged for common shares pertains to convertible securities, being sold to the market does not relate to the callability of a stock, and the requirement to pay dividends is not a condition of callability, as callable securities are not guaranteed dividends if called.