Definition of Stock dividend

Stock dividend

Payment of a corporate dividend in the form of stock rather than cash. The stock dividend
may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders.
stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock
dividends are not taxed until sold.

stock dividend

Distribution of additional shares to a firm’s stockholders.

Dividend yield (Stocks)

Indicated yield represents annual dividends divided by current stock price.

Preferred Stock Stock that has a claim on assets and dividends of a corporation that are prior

to that of common stock. Preferred stock typically does not carry the right to vote.

Cash flow coverage ratio

The number of times that financial obligations (for interest, principal payments,
preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental
payments, and depreciation.

Cash flow per common share

Cash flow from operations minus preferred stock dividends, divided by the
number of common shares outstanding.

Cumulative dividend feature

A requirement that any missed preferred or preference stock dividends be paid
in full before any common dividend payment is made.

Preferred stock

A security that shows ownership in a corporation and gives the holder a claim, prior to the
claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most
preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a dollar
amount or as a percentage of par value. This stock does not usually carry voting rights. The stock shares
characteristics of both common stock and debt.

Acquisition of stock

A merger or consolidation in which an acquirer purchases the acquiree's stock.

Adjustable rate preferred stock (ARPS)

Publicly traded issues that may be collateralized by mortgages and MBSs.

American Stock Exchange (AMEX)

The second-largest stock exchange in the United States. It trades
mostly in small-to medium-sized companies.

Auction rate preferred stock (ARPS)

Floating rate preferred stock, the dividend on which is adjusted every
seven weeks through a Dutch auction.

Beta equation (Stocks)

The beta of a stock is determined as follows:
[(n) (sum of (xy)) ]-[(sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[(sum of x) (sum of x)]
where: n = # of observations (24-60 months)
x = rate of return for the S&P 500 Index
y = rate of return for the stock

Cash dividend

A dividend paid in cash to a company's shareholders. The amount is normally based on
profitability and is taxable as income. A cash distribution may include capital gains and return of capital in
addition to the dividend.

Common stock

These are securities that represent equity ownership in a company. Common shares let an
investor vote on such matters as the election of directors. They also give the holder a share in a company's
profits via dividend payments or the capital appreciation of the security.

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

Common stock equivalent

A convertible security that is traded like an equity issue because the optioned
common stock is trading high.

Common stock market

The market for trading equities, not including preferred stock.

Common stock ratios

Ratios that are designed to measure the relative claims of stockholders to earnings
(cash flow per share), and equity (book value per share) of a firm.

Conflict between bondholders and stockholders

These two groups may have interests in a corporation that
conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective
covenants work to resolve these conflicts.

Convertible exchangeable preferred stock

Convertible preferred stock that may be exchanged, at the
issuer's option, into convertible bonds that have the same conversion features as the convertible preferred
stock.

Convertible preferred stock

Preferred stock that can be converted into common stock at the option of the holder.

Cum dividend

With dividend.

Cumulative preferred stock

Preferred stock whose dividends accrue, should the issuer not make timely
dividend payments. Related: non-cumulative preferred stock.

Direct stock-purchase programs

The purchase by investors of securities directly from the issuer.

Discounted dividend model (DDM)

A formula to estimate the intrinsic value of a firm by figuring the
present value of all expected future dividends.

Dividend

A dividend is a portion of a company's profit paid to common and preferred shareholders. A stock
selling for $20 a share with an annual dividend of $1 a share yields the investor 5%.

Dividend clawback

With respect to a project financing, an arrangement under which the sponsors of a project
agree to contribute as equity any prior dividends received from the project to the extent necessary to cover
any cash deficiencies.

Dividend clientele

A group of shareholders who prefer that the firm follow a particular dividend policy. For
example, such a preference is often based on comparable tax situations.

Dividend discount model (DDM)

A model for valuing the common stock of a company, based on the
present value of the expected cash flows.

Dividend growth model

A model wherein dividends are assumed to be at a constant rate in perpetuity.

Dividend limitation

A bond covenant that restricts in some way the firm's ability to pay cash dividends.

Dividend payout ratio

Percentage of earnings paid out as dividends.

Dividends per share

Amount of cash paid to shareholders expressed as dollars per share.

Dividend policy

An established guide for the firm to determine the amount of money it will pay as dividends.

Dividend rate

The fixed or floating rate paid on preferred stock based on par value.

Dividend reinvestment plan (DRP)

Automatic reinvestment of shareholder dividends in more shares of a
company's stock, often without commissions. Some plans provide for the purchase of additional shares at a
discount to market price. dividend reinvestment plans allow shareholders to accumulate stock over the Long
term using dollar cost averaging. The DRP is usually administered by the company without charges to the
holder.

Dividend rights

A shareholders' rights to receive per-share dividends identical to those other shareholders receive.

Dividend yield (Funds)

Indicated yield represents return on a share of a mutual fund held over the past 12
months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not
redemption charges.

Dividends per share

dividends paid for the past 12 months divided by the number of common shares
outstanding, as reported by a company. The number of shares often is determined by a weighted average of
shares outstanding over the reporting term.

Employee stock fund

A firm-sponsored program that enables employees to purchase shares of the firm's
common stock on a preferential basis.

Employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys stock on behalf of
employees.

Exchange of stock

Acquisition of another company by purchase of its stock in exchange for cash or shares.

Extra or special dividends

A dividend that is paid in addition to a firm's "regular" quarterly dividend.

Ex-dividend

This literally means "without dividend." The buyer of shares when they are quoted ex-dividend
is not entitled to receive a declared dividend.

Ex-dividend date

The first day of trading when the seller, rather than the buyer, of a stock will be entitled to
the most recently announced dividend payment. This date set by the NYSE (and generally followed on other
US exchanges) is currently two business days before the record date. A stock that has gone ex-dividend is
marked with an x in newspaper listings on that date.

Growth stock

Common stock of a company that has an opportunity to invest money and earn more than the
opportunity cost of capital.

Homemade dividend

Sale of some shares of stock to get cash that would be similar to receiving a cash dividend.

Income stock

Common stock with a high dividend yield and few profitable investment opportunities.

Indicated dividend

Total amount of dividends that would be paid on a share of stock over the next 12 months
if each dividend were the same amount as the most recent dividend. Usually represent by the letter "e" in
stock tables.

Letter stock

Privately placed common stock, so-called because the SEC requires a letter from the purchaser
stating that the stock is not intended for resale.

Listed stocks

stocks that are traded on an exchange.

Liquidating dividend

Payment by a firm to its owners from capital rather than from earnings.

Listed stocks

stocks that are traded on an exchange.

Margin account (Stocks)

A leverageable account in which stocks can be purchased for a combination of
cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock
drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin
rules are federally regulated, but margin requirements and interest may vary among broker/dealers.

New York Stock Exchange (NYSE)

Also known as the Big Board or The Exhange. More than 2,00 common
and preferred stocks are traded. The exchange is the older in the United States, founded in 1792, and the
largest. It is lcoated on Wall Street in New York City

Non-cumulative preferred stock

Preferred stock whose holders must forgo dividend payments when the
company misses a dividend payment.
Related: Cumulative preferred stock

Perfect market view (of dividend policy)

Analysis of a decision on dividend policy, in a perfect capital
market environment, that shows the irrelevance of dividend policy in a perfect capital market.

Philadelphia Stock Exchange (PHLX)

A securities exchange where American and European foreign
currency options on spot exchange rates are traded.

Preferred equity redemption stock (PERC)

Preferred stock that converts automatically into equity at a
stated date. A limit is placed on the value of the shares the investor receives.

Preference stock

A security that ranks junior to preferred stock but senior to common stock in the right to
receive payments from the firm; essentially junior preferred stock.

Preferred stock agreement

A contract for preferred stock.

Repurchase of stock

Device to pay cash to firm's shareholders that provides more preferable tax treatment
for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been
repurchased by the firm. A repurchase is achieved through either a dutch auction, open market, or tender offer.

Residual dividend approach

An approach that suggests that a firm pay dividends if and only if acceptable
investment opportunities for those funds are currently unavailable.

Reverse stock split

A proportionate decrease in the number of shares, but not the value of shares of stock
held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a
1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. After the
reverse split, the firm's stock price is, in this example, worth three times the pre-reverse split price. A firm
generally institutes a reverse split to boost its stock's market price and attract investors.

Signaling view (on dividend policy)

The argument that dividend changes are important signals to investors
about changes in management's expectation about future earnings.

Special dividend

Also referred to as an extra dividend. dividend that is unlikely to be repeated.

Stock

Ownership of a corporation which is represented by shares which represent a piece of the corporation's
assets and earnings.

Stock exchanges

Formal organizations, approved and regulated by the Securities and Exchange Commission
(SEC), that are made up of members that use the facilities to exchange certain common stocks. The two major
national stock exchanges are the New York stock Exchange (NYSE) and the American stock Exchange (ASE
or AMEX). Five regional stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and Cincinnati.
The Arizona stock exchange is an after hours electronic marketplace where anonymous participants trade
stocks via personal computers.

Stock repurchase

A firm's repurchase of outstanding shares of its common stock.

Stock selection

An active portfolio management technique that focuses on advantageous selection of
particular stocks rather than on broad asset allocation choices.

Stockholder equity

Balance sheet item that includes the book value of ownership in the corporation. It
includes capital stock, paid in surplus, and retained earnings.

Stock index option

An option in which the underlying is a common stock index.

Stock market

Also called the equity market, the market for trading equities.

Stock option

An option in which the underlying is the common stock of a corporation.

Stock replacement strategy

A strategy for enhancing a portfolio's return, employed when the futures
contract is expensive based on its theoretical price, involving a swap between the futures, treasury bills
portfolio and a stock portfolio.

Stock split

Occurs when a firm issues new shares of stock but in turn lowers the current market price of its
stock to a level that is proportionate to pre-split prices. For example, if IBM trades at $100 before a 2-for-1
split, after the split it will trade at $50 and holders of the stock will have twice as many shares than they had
before the split. See: split.

Stock ticker

This is a lettered symbol assigned to securities and mutual funds that trade on U.S.financial exchanges.

Stockholder

Holder of equity shares in a firm.

Stockholder's books

Set of books kept by firm management for its annual report that follows Financial
Accounting Standards Board rules. The tax books follow IRS tax rules.

Stockholder's equity

The residual claims that stockholders have against a firm's assets, calculated by
subtracting total liabilities from total assets.

Stockout

Running out of inventory.

Tax differential view ( of dividend policy)

The view that shareholders prefer capital gains over dividends,
and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.

Traditional view (of dividend policy)

An argument that "within reason," investors prefer large dividends to
smaller dividends because the dividend is sure but future capital gains are uncertain.

Treasury stock

Common stock that has been repurchased by the company and held in the company's treasury.

With dividend

Purchase of shares in which the buyer is entitled to the forthcoming dividend. Related: exdividend.

BOOK VALUE OF COMMON STOCK

The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals:
(stockholders’ equity) / (Common stock shares outstanding)

Dividend

A payment a company makes to stockholders. Earnings before income tax. The profit a company made
before income taxes.

Earnings per share of common stock

How much profit a company made on each share of common stock this year.

RATE OF RETURN ON STOCKHOLDERS’ EQUITY

The percentage return or profit that management made on each dollar stockholders invested in a company. Here’s how you figure it:
(Net income) / (stockholders’ equity)

RATIO OF DEBT TO STOCKHOLDERS’ EQUITY

A ratio that shows which group—creditors or stockholders—has the biggest stake in or the most control of a company:
(Total liabilities) / (stockholders’ equity)

STOCK

Certificates that signify ownership in a corporation. A share of stock represents a claim on a portion of the company’s assets.

STOCKHOLDERS’ (OR OWNERS’) EQUITY

The value of the owners’ interests in a company.

Dividend

The payment of after-tax profits to shareholders as their share of the profits of the business for an accounting period.

Stock

See inventory.

Common stock

Shares of ownership sold to the public.

Dividend income

Income that a company receives in the form of dividends on stock in other companies that it holds.

Dividends

Amounts paid to the owners of a company that represent a share of the income of the company.

No par value stock

stock issued by the company that does not have an arbitrary value (par value) assigned to it.

Stated value stock

stock issued by the company that does not have a par value, but does have a stated value. For accounting purposes, stated value is functionally equivalent to par value.

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