MENU
Popular articles
Table of Contents

EDU Articles

Ad is loading...

Popular articles
Table of Contents
Help CenterFind Your WayBuy/Sell Daily ProductsIntraday ProductsFAQ
Expert's OpinionsBest StocksInvestingTradingCryptoArtificial Intelligence
IntroductionMarket AbbreviationsStock Market StatisticsThinking about Your Financial FutureSearch for AdvisorsFinancial CalculatorsFinancial MediaFederal Agencies and Programs
Investment PortfoliosModern Portfolio TheoriesInvestment StrategyPractical Portfolio Management InfoDiversificationRatingsActivities AbroadTrading Markets
Investment Terminology and InstrumentsBasicsInvestment TerminologyTrading 1 on 1BondsMutual FundsExchange Traded Funds (ETF)StocksAnnuities
Technical Analysis and TradingAnalysis BasicsTechnical IndicatorsTrading ModelsPatternsTrading OptionsTrading ForexTrading CommoditiesSpeculative Investments
Cryptocurrencies and BlockchainBlockchainBitcoinEthereumLitecoinRippleTaxes and Regulation
RetirementSocial Security BenefitsLong-Term Care InsuranceGeneral Retirement InfoHealth InsuranceMedicare and MedicaidLife InsuranceWills and Trusts
Retirement Accounts401(k) and 403(b) PlansIndividual Retirement Accounts (IRA)SEP and SIMPLE IRAsKeogh PlansMoney Purchase/Profit Sharing PlansSelf-Employed 401(k)s and 457sPension Plan RulesCash-Balance PlansThrift Savings Plans and 529 Plans and ESA
Personal FinancePersonal BankingPersonal DebtHome RelatedTax FormsSmall BusinessIncomeInvestmentsIRS Rules and PublicationsPersonal LifeMortgage
Corporate BasicsBasicsCorporate StructureCorporate FundamentalsCorporate DebtRisksEconomicsCorporate AccountingDividendsEarnings

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 Dividend Enhanced Convertible Stock (DECS)?

This is a type of automatically convertible security that comes in the form of preferred stock shares, which function basically like bonds, that experience a mandatory conversion to common stock at some point. The dividend enhancement is a higher yield payout than other share classes are offered, to compensate the investor for the lack of control he or she has, since the shares will be converted at a predetermined time by the company. Mandatory convertible shares will offer a higher yield than their counterparts, but it will only last as long as the issuing company has determined. Continue reading...

What is a covered call?

What is a covered call?

A covered call is when the writer or seller of a call option either owns the underlying security, or has a guaranteed way to obtain it. Investors are able to open a position for another investor to take. An example of this would be selling a call option. The seller, or “writer,” of the contract is obligated to fulfill the contractual obligation outlined in the call, namely to deliver 100 shares of the underlying stock to the owner of the call option in exchange for the strike price listed in the call contract. Continue reading...

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 Dividend Selling?

If a person buys a stock that pays a dividend on or after the ex-dividend date, where we understand “ex” to mean “after,” it means that the buyer would be buying the shares for the amount that still has a dividend (or some of it) priced-in, but the seller, not the buyer, will get to have the dividend, and the share price will go down immediately after the dividend is paid. Stock prices will tend to go up in anticipation of a dividend, and more so after the declaration date, which might be anywhere from two months to two weeks before the actual dividend is paid, when the company announces when a dividend is to be paid and how much it will be. Continue reading...

What is Dividend Yield?

What is Dividend Yield?

A dividend yield is a ratio that represents how much a company pays in annual dividends relative to its share price. A dividend yield is represented as a percentage, and is easily calculated. Simply divide the annual dividends paid per year (dollar value) by the per share price of the stock. Here’s the equation in simple terms: Annual Dividends Per Share / Price Per Share = Dividend Yield A company with a higher dividend yield means they pay out more of their profits to shareholders, but it also means that company may be allocated less of their free capital towards investment, research, and other growth areas. Continue reading...

What is Dividend Drag?

When an ETF is not able to offer a quick, automatic dividend reinvestment option to clients, it can sometimes take a week or more to get the dividends back into the market. In a rising market, this lag can cause the reinvested amounts to purchase higher-priced shares than they would have been otherwise. This drags the performance of the fund down, compared to an index or more efficient fund. The structure of ETFs prevents them from immediately reinvesting dividends, and they often do not offer what is known as a DRIP, or dividend reinvestment plan, which is built into many pooled investments like mutual funds (and other ETFs). Continue reading...

What is a Dividend ETF?

What is a Dividend ETF?

Dividend ETFs invest primarily in preferred stock and stocks that pay regular dividends. Strategically, they tend to be either Dividend Appreciation or High Yield. Dividend ETFs are equity dividend funds that seek income from preferred stocks, common stocks. As of 2016 there are over 130 Dividend ETFs, and that’s up from about 29 in 2011 and 45 in 2012. This has become a popular strategy, obviously, and they all seek to distinguish themselves from the pack. Continue reading...

What is Investment Income?

Also referred to as passive income, investment income is money paid to an investor from the dividends, premiums sold, or sale of assets in their portfolio. Some investors treat it like a part-time job, such that there is nothing passive about it. In retirement, investors often receive income from bonds, preferred stock, and dividend-paying common shares. Income can be pulled from several kinds of investments, including real estate, and it is likely to be taxed at ordinary income tax rates. Continue reading...

What is Dividend Policy?

Different companies have different approaches to dividends: whether to pay them, whether it’s a fixed amount in the budget or dependent on the kind of expenses they incur each year. These and other considerations make up what is known as a company’s dividend policy. Companies may have a different phases in their development that will lead them to adopt different dividend policies along the way. As a young company in the Growth category, the dividend policy will most likely be not to distribute any dividends. 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 Dividend Arbitrage?

Arbitrage opportunities can be found in a few different places in the market, when risk-free profit can be made. If a stock is purchased before the ex-dividend date, and a put is exercised when the share price falls after the dividend is distributed, it is known as dividend arbitrage. Arbitrage is when an investor finds a situation where one thing can be exchanged for another, such as the same thing on two different exchanges or similar fixed instruments which can be swapped, when no risk is taken and a profit is gained. 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...

What is Dividend Recapitalization?

Leveraged Recapitalizations involve issuing new corporate bonds to finance a share buyback or large dividend, essentially rebalancing the capital structure of the business. Dividend recapitalizations will cause the share price to reduce, largely because the company’s debt-to-equity ratio has changed. This can be used to make the company look unattractive to potential acquirers. Recapitalizations are restructuring of a company’s capital. Dividend recapitalizations are sometimes called dividend recaps. Continue reading...

What are the Tax Implications for Making a Profit (or Loss) On a Stock?

Gains on stock investments will be taxable in the current year unless they can be offset with losses. Stocks that appreciate in value do not incur any tax liability while they are held, unless they pay dividends. Dividends will generally be taxable as ordinary income. For this article we will focus on capital appreciation instead of dividends. Capital appreciation can be considered long-term gains or short-term gains by the IRS upon the sale of the shares. A stock held for less than a year will incur short-term capital gains taxes, which are taxed at ordinary income rates. Continue reading...

What is Dividend Frequency?

Dividends are paid at certain intervals by companies who pay them. This might be quarterly, annually, or semi-annually. The dividend rate that investors should keep up with is the annualized amount, but there is a lot to be said for quarterly or monthly payments, particularly for those actually using dividends as income, but even if you are just reinvesting. Higher dividend payment frequency means higher liquidity, more control, and probably higher returns in your portfolio. 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 Total Return?

Total Return is the measure of all appreciation and interest as well as dividends and other distributions from an investment. Often computations of return will only consider appreciation, and it can be an easy mistake to make when looking at performance data at times. When a stock pays significant and consistent dividends, it needs to be factored in to the computation of total return. This adds a significant compounding effect to the investment’s overall performance, but if you just looked at the sheets that said it had a 4% return and a 2% dividend yield, you would be missing the most important part. Total return can be calculated for different kinds of investments or an entire portfolio, and is often done on an annual basis once all distributions have been made. Continue reading...

What is the Dividend Payout Ratio?

The Dividend Payout Ratio represents the percentage of a company’s earnings/profits that they pay-out to shareholders in the form of dividends. Companies with higher dividend payout ratios tend to be older, more well-established corporations with long histories of dividend payments. Newer, more growth oriented companies will tend to take earnings and reinvest them in the company, whether via additional fixed investment, inventory expansions, hiring more people, or entering new markets. Continue reading...

What is Form 1099-DIV?

IRS Link to Form — Found Here Form 1099-DIV is used to report dividend income and distributions from investments, and is usually filed by the company making the distribution. The taxpayer will only use the form as a reference for reporting on other forms, such as the Schedule B if the distributions are over $1,500. Mutual funds are a common source of the 1099-DIV, since they have to distribute their gains to shareholders every year. Continue reading...