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24 Cards in this Set
- Front
- Back
- 3rd side (hint)
Fixed Rate of Return
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Normally has an annual dividend stated by a percentage of it's par value (assume $100)
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A preferred stock's par value is more meaningful than common stock, because common stock par value is less important than book value and market value
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This equity's prices tend to fluctuate with interest rates rather than the company's outlook unless a company's credit is diminished
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Preferred stock
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Preferred stock is non-voting
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Adjustable rate preferred
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Stocks are issued with variable or adjustable dividend rates that follow some other interest rate benchmark. Can be adjusted semi annually
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Ex: Treasury Bill and money market rates
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Reset Date
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Date of dividend adjustment for a preferred stock
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Adjustable rate stock that is
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Scheduled Redemption date/Set Date for Preferred stock?
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None, because it is not a bond so it does not mature
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Preset date is when a bond matures
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Straight Preferred
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Noncumulative, nothing beyond a fixed dividend
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Missed dividends arent paid
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Cumulative Preferred
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Missed dividends get paid to owners when dividend announced by BOD
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annual dividend times numbers of years missed
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Convertible Preferred
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Stock can be converted to common stock at a preset amount.
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Typically issued at a lower dividend since may convert and earn capital gains
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Exercising an option of this type of stock increases the total number of common stock outstanding
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Convertible preferred
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As a result, leads to decrease in earnings per common share and may decrease market value (flooding)
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Participating Preferred
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Earn a share of corporate profits after dividends/interest due has been paid
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Percentage at which the stock participates is noted on certificate ex. described as IMB 6% preferred participating to 9%, meaning owners can receive up to 3% more if decided
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Callable
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redeemable, can be bought
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Callable Preferred
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Company can buy back from investors at stated price after a specified date
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Benefit: can replace a high fixed dividend with a lower one. Company usually pays a premium to the par value for the privilege when redeem. Ex: Paying $130 for a share with a $100 par value
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Which has a higher stated rate- Straight or Cumulative
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Straight, because Cumulative doesn't risk missing a dividend
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This preferred stock will have the highest stated dividend, all other factors being equal
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Callable, because company is paying for risk that stock will be redeemed
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Stock Power
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Document that is signed in order to transfer ownership of stock
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Transfer Agent
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Manages securities ownership. Issues, cancels, maintains records for stock ownership.
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Cannot be the same person or department as the registrar
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Stock split causes which two measurements change
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Par value and market value
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2:1 stock split results in double outstanding shares and each stock's par value is halved. Two nickels instead of a dime
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Registrar
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Responsible for accounting for all of an issuers outstanding stock
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A state entity
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Ex-dividend
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Selling without rights to dividend payments. Seller receives the dividend, not buyers
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Ex dividend date- point at which stock's dividend does not transfer in a trade. Two business days before record date. Customer must buy stock 3 days before record date, since trades settle T+3 typically
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Dividend Record Date
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Owners of a stock this day receive the dividend
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Dividend Payable date
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3 or 4 weeks after the record date
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Sent by the dividend disbursing agent
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Cash Trades
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Cash trades settle the same day, so they go in ex-dividend on the day after the record date
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No lag occurs as a result of no settlement period
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DERP
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Order of dates in dividend distributions
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Declaration, EX, Record, Payable
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Special handling of a stock distribution at or above this number
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25% of a stock distribution
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