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What is Dividend Per Share?
Dividend payments are allocated on a per-share basis. The company issuing them may announce the dividend in terms of the dollar value, but investors and analytical services will translate that into a percentage yield. When calculating the dividend from a company perspective, the total dividend amount that they are comfortable declaring is divided by the number of outstanding shares. The dividend per share is an important number, and the growth of this number is the dividend growth rate. Continue reading...
What is Diluted Earnings Per Share?
If all the convertible securities a company had issued were converted at once to common stock, the stock would be diluted; Diluted EPS reveals by how much. Companies will sometimes entice investors to buy bonds or preferred stock by giving them an option to convert them into shares of common stock. If a bond is converted, shareholders equity increases on the balance sheet and liabilities go down, since a debt liability is being retired. Continue reading...
What are Fully Diluted Shares?
Fully Diluted Shares are a calculation used to show how much the existing shares of common stock could potentially be diluted if all the convertible securities and employee stock options, were exercised. Fully Diluted Shares is a calculation used to show the potential number of shares that could hypothetically be called into existence instantaneously by the holders of convertible securities, warrants, employee stock options and so forth. Continue reading...
What are Accounting Earnings?
Earnings that are reported in a given year may differ for the same company if different accounting methods were used. Earnings are the revenues of the company minus the cost of good sold, expenses, and investment losses. If that seems like something that’s pretty cut-and-dried, and will look the same no matter who is doing the accounting… well, that’s not entirely correct. Earnings can be made to look different if different non-GAAP or pro-forma methods are used. If non-recurring expenses are ignored or amortized in a pro-forma accounting method, then earnings will not match up to the GAAP-based books. Continue reading...
What is a Secondary Offering?
A secondary offering is the sale of a large block of previously-issued, privately-held stock, which actually requires registration with the SEC, but does not raise capital for the company which issued the shares originally. A secondary offering is a non-dilutive sale of existing shares which were previously held by one, or a few, investors. The proceeds of the sale go to the sellers of the shares and not to the company which issued the shares. Continue reading...
What is Dilution?
Dilution is the disassociation of value from current common stock shares due to the issuance or conversion of additional shares of the same company into the market, causing value to be reallocated. If a company issues a follow-on (aka Secondary) issue of shares, or if many holders of convertible shares decide to use their conversion privilege, the share price will be diluted. Each share’s value will decrease because there are now an increased number of shares dividing up the same amount of earnings that the company generates. Continue reading...
What is Earnings Season?
Earnings season describes not one, but four times in a year, when corporations release their quarterly earnings reports. Investors look forward to this time because they are able to get an update about how the year is going, compared to projections. After each fiscal quarter ends, there are a few weeks in which companies file their quarterly reports with the SEC and announce their current earnings and sales numbers. Each of these periods is known as earnings season. Continue reading...
What is an Accelerated Share Repurchase?
An Accelerated Share Repurchase (ASR) is a method by which companies can buy back a significant amount of their outstanding shares with the help of an investment bank. By enlisting the help of an investment bank to accelerate a buy-back, a company can cleanly retire a large bulk of shares at once. These agreements have come into use in the last 10 years, and there is of course some variation in their composition. They fall under a category of buybacks known as structured buybacks. Continue reading...
What is a Buyback?
When a company decides to use excess cash to purchase its own shares from the market, it is called a buyback or “share repurchase program.” There are only so many things a company can do with earnings in excess of their projections; among these are issuing a dividend, paying off debts, expanding, acquiring another company, or buying back shares of its own stock. Buybacks are also known as Stock Repurchase Agreements. There may be guidelines in state law or the company’s contracts or buy laws that determine what options they have and how many shares can be repurchased. Continue reading...
What is an Earnings Call?
An earnings call is when a company opens up a teleconference line or webcast that the public can join to hear the company management talk about how the company performed recently, their plans for the future, and the market forces that exist in the current environment. Most publicly traded companies today have adopted this practice. Earnings calls may take place once a year or during earnings seasons after the quarterly earnings have been announced in a press release. Companies often have one executive whose job is to interface with the shareholders in such settings, but various executives are often given a chance to present some thoughts. Continue reading...
Why Do You Want to Own the Shares of a Publicly Traded Corporation?
The idea is that a shareholder’s interest in a growing publicly traded company will become more valuable over time. The simplest answer is: to make money! Owning shares of a company’s stock is known as taking a long position, and this is done in the belief that the company is going to increase its earnings and profit margin into the future, or will at least remain steady. There are three ways to make money on stocks: Continue reading...
What does 'Outstanding Shares' mean?
Outstanding shares refers to all of the shares of company held in total, which includes all ownership - retail investors, institutional, the company’s officers, insiders, and so on. Outstanding shares are listed on the balance sheet under “Capital Stock,” and are used in calculating market capitalization, earnings per share, and other critical per share calculations. The amount of outstanding shares can fluctuate over time on the basis of corporate actions, such as share buybacks (reduces overall count) or new share issuance (increases overall count). Continue reading...
What is a Dividend?
A dividend is an income-like payment to an investor who holds stock. Dividends tend to be paid by companies who are well established and are not retaining their earnings for capital projects. There are several kinds of dividends, but the most common is the cash dividend. You are not likely to see dividends paid by companies whose stocks are categorized as Growth stocks. Growing companies are going to be ploughing money back into their company for years. Well-established companies tend to distribute some of their profits as dividends because it allows them to retain loyal shareholders and keep the price of the stock fairly steady. Continue reading...
What is a Multiple?
A multiple is a measure of a stock’s value, calculated by comparing one metric to another. The most common is the metric comparing a stock’s price to its earnings. The most commonly used ‘multiple’ calculation is price to earnings, or P/E. This tells you the price of stock relative to its earnings per share. P/E’s are most useful when comparing stocks in the same industry or sector. For instance, a P/E of 25x may seem high to most, but it’s actually quite normal for stocks in the technology sector. Continue reading...
What are REITs?
REITs are pooled investments similar to mutual funds, but, like mutual funds, they can take many shapes. They invest in different kinds of real estate and real estate-oriented assets, depending on the REIT, and sell ownership shares to investors. REIT is an acronym for Real Estate Investment Trust. REITs are similar to mutual funds, except that they only invest in real estate properties and related companies and assets such as mortgages. REITs will define the scope of their investments and strategies in their prospectus, which may read something like “We invest only in commercial Real Estate” or “Only in residential houses in Las Vegas” while other REITs are very general. Continue reading...
What Rights Does Owning Shares of Corporation Give You?
Shareholders of a company are part-owners of the company, and they are entitled to two things: voting for board members, and participation in earnings. Owning shares (even one single share!) of a publicly-traded corporation entitles you to the right to vote in elections for the Board of Directors, as well as the right to receive a proportional amount of all the profits of the company. These rights apply to common stock, which is generally the kind of stock traded on exchanges. Of course, you also have the right to sell your shares on the stock exchange at any time, in what is known academically as the Secondary Market. Continue reading...
What are Corporate Earnings?
Earnings are the net revenue of a company after expenses and, sometimes, taxes. Also known as profit. Corporate earnings are an important metric for individual companies and the economy as a whole, because it shows how much money has been made. Revenue is the inflow of money to a company, and earnings are the net revenue, or profit, after expenses have been taken out. Of course there is also EBITDA, which is Earnings Before Interest Taxes Depreciation and Amortization, but this is a non-GAAP method. Earnings are usually calculated on a quarterly basis. Continue reading...
What is an "Ex-Dividend"?
Ex-Dividend is a classification on a stock that indicates the dividend payable is to the seller of the stock, not the buyer. If a stock is sold on the ex-date or after, the seller will receive the dividend payment. More articles about Dividends — Found Here Continue reading...
What is a Dividend Rate?
The dividend rate is basically just the value of the annual dividend of a company, stated as the monetary value. Not to be confused with the dividend yield, or the dividend growth rate, both of which are percentages. Dividend yield and dividend rate are slightly different from one another. The dividend yield is the size of a dividend in relation to the share price, and is stated as a percentage. The dividend rate is actually the amount of money paid out per share, per year, stated as a dollar amount. Continue reading...
What is Dividend Capture?
Dividend capture is a strategy similar to dividend arbitrage that seeks to reap incremental gains somewhat reliably around the ex-dividend date of a stock. The investor seeks to benefit from the fact that stock prices don’t always go down as much as they should on the ex-dividend date, so by selling quickly at that point, the investor may still get a small gain from the dividend that will still be paid to him or her. Dividend capture is a strategy that plays on slight inefficiencies in prices around the ex-dividend date. Continue reading...