Dividends
Annuitization is the act of triggering a series of payments, usually from an annuity. An annuity is a contract whereby an investor makes a lump-sum payment to an insurance company, bank or other fin...
A bank deposit agreement, also called a Bank Investment Contract (BIC), is an agreement between a bank and an investor where the bank provides a guaranteed rate of return in exchange for keeping a de...
A bank investment contract (BIC), also sometimes called a Bank Deposit Agreement, is an agreement between a bank and an investor whereby the bank provides a guaranteed rate of return in exchange for ...
A blue-chip stock is a stock of an established company that has consistently shown qualities like generating consistent earnings, paying generous dividends or increasing revenue. Blue-chip stocks a...
A brokered certificate of deposit (a brokered CD) is a CD sold by a brokerage firm. A CD is a time deposit with a bank or financial institution. The investor agrees to leave the deposit with the ins...
A callable certificate of deposit (callable CD) is a time deposit with a bank or financial institution. But unlike other CDs, callable CDs can be redeemed by the issuer before the maturity date. For...
A cash dividend is a cash payment made to the shareholders of a corporation. Generally, cash dividends are reported in dollars per share when discussing common stock. When discussing preferred stock...
A CD ladder is an investing strategy whereby the investor staggers the maturity of ("ladders") the certificates of deposit in his portfolio so that the proceeds can be reinvested at regular intervals...
A certificate of deposit (CD) is a relatively low-risk debt instrument purchased directly through a commercial bank or savings and loan institution. The certificate of deposit indicates that the in...
A cumulative dividend is a dividend, usually on preferred shares, that must be paid before any other dividends on any of the issuer's other securities. Preferred stock that does not carry a cumulativ...
Daily factor is the amount of yield earned in a day. Recall that yield is the percentage interest an investor would earn if he or she purchased a given bond at its current market price. The formula ...
In the income investing world, a declaration date is the date on which a company announces an upcoming dividend payment, usually by issuing a press release a few weeks before the dividend is actually...
A dedicated portfolio is a passively managed portfolio whose cash flows are designed to match the cash flows needed to fulfill a future obligation. A dedicated portfolio is also referred to as a str...
Dividends are payments from corporate earnings to company shareholders. Dividends are one way for you to receive a return from owned shares. You can think of them as a reward for investing your money...
The term "dividend achievers" is used to describe an elite group of companies that have improved their annual regular dividends for at least 10 consecutive years and meet certain liquidity requiremen...
The term "dividend aristocrats" is used to describe Standard & Poor's (S&P) 500® Index companies that have consistently improved their dividend rates every year for at least 25 consecutive y...
The dividend capture strategy is the act of purchasing a security for its dividend, capturing the dividend, and then selling the security to buy another about to pay a dividend. By doing this, invest...
A dividend declaration date is the date on which a company announces an upcoming dividend payment, usually by issuing a press release a few weeks before the dividend is actually paid. Let's assume y...
The dividend payable date is the date on which a company pays a dividend to its shareholders of record. Let's assume you own 100 shares of Company XYZ. At the end of the quarter (say, March 30), Co...
A dividend record date is the date on which the company finalizes the list of investors who qualify as "shareholders of record." Investors listed as shareholders of record will receive the firm's div...
A dividend reinvestment plan (DRIP) is an arrangement offered by companies to investors wishing to receive additional shares of company stock in lieu of cash dividend payments. In many cases, optim...
Dividend yield is the annual dividend payment shareholders receive from a particular stock shown as a percentage of the stock's price. (Dividends are corporate earnings distributed to company shar...
Earning assets are assets that generate income like interest or dividends. Typically, earning assets require very little ongoing work from the owner of the assets. Interest-bearing accounts, CDs, di...
The effective annual interest rate is the rate of interest an investor earns in a year after accounting for the effects of compounding.  The formula for effective annual interest rate is: (1 + i / ...
An equity income fund is a mutual fund composed largely of dividend-paying stocks. Equity income funds are made up of a variety of different income investments, but they generally invest in securiti...
Some stocks pay cash (or additional stock) dividends to their investors throughout the year. The ex-dividend date (also referred to as “ex-date”) is important for an investor to know because it d...
A fixed annuity offers a fixed rate of return, and all its future payments are equal amounts. Assume you'd like to invest in a vehicle that will provide you with guaranteed monthly payments of $1,16...
A fixed income security is an investment that pays regular income in the form of a coupon payment, interest payment or preferred dividend. Fixed income securities provide periodic income payments...
Fixed-rate capital securities are fixed income securities that have features of both corporate bonds and preferred stock. Similar to a hybrid security, fixed-rate capital securities have features of...
A forward dividend yield is a stock's annualized dividend based on its latest declared dividend payment. Forward dividend yields can be calculated in a number of ways, and depending on which way th...
The Gordon Growth Model (GGM) is a version of the dividend discount model (DDM). It is used to calculate the intrinsic value of a stock based on the net present value (NPV) of its future dividends.....
Gross interest is the amount of interest an account or investment earns before deducting taxes, fees or other charges. It is expressed as a percentage. Let's assume you open a "Super Saver Savings A...
A guaranteed death benefit is a portion of an annuity that allows the investor's beneficiaries to receive a minimum amount of death benefits.   Let's say Jane Doe bought an annuity for $500,000 tha...
A guaranteed investment contract (GIC) is an agreement between a contract purchaser and an insurance company whereby the insurance company provides a guaranteed rate of return in exchange for keeping...
An illegal dividend is a dividend declared in violation of a company's charter or state laws.   For example, let's say Company XYZ has $20,000,000 of retained earnings. It recently raised $20,000,...
Immediate payment annuities (also called single-premium immediate annuities or SPIAs) are annuities that begin making payments to the owner immediately (within one year of purchase). An annuity is a...
Income funds are mutual funds, ETFs or any other type of fund that seek to generate an income stream for shareholders by investing in securities that offer dividends or interest payments. The funds c...
An income stock is a stock in which a taxable payment is declared by a company's board of directors and is given to the shareholders from the current or retained earnings that occur, usually on a qu...
An index annuity is an annuity that pays a rate of return corresponding to a particular index, such as the S&P 500 Index. An annuity is a contract whereby an investor makes a lump-sum payment to...
An indexed annuity is an annuity that pays a rate of return corresponding to a particular index, such as the S&P 500 Index. An annuity is a contract whereby an investor makes a lump-sum payment ...
Indicated yield is the dividend yield on a stock if the most recent dividend is annualized. The formula for indicated yield is:  Indicated Yield = (Most Recent Dividend x Number of Dividend Payment...
A managed distribution policy is an issuer's commitment to make a fixed periodic dividend payment. This means investors can buy shares of a security with the confidence that they will receive a relia...
Mortgage-backed securities (MBS) are securities that represent an interest in a pool of mortgage loans. To understand how MBS work, it's important to understand how they're created. Let's assume you...
Net interest margin securities (NIMS) provide investors with cash flows from securitized mortgages. The first NIMS came into the marketplace in the mid-1990s. When the homeowners make their mortgage...
An ordinary dividend is a dividend that is not eligible for capital gains tax. For example, let’s assume that John Doe holds 10,000 shares of Company XYZ stock, which pays $0.20 per year in divide...
Pasternak's normalized net asset value (NNAV) allows investors to compare master limited partnership (MLP) funds with each other and with non-MLP closed-end funds. Pasternak's NNAV was created by Ca...
A qualified dividend is a dividend eligible to incur capital gains tax. For example, let's assume that John owns 10,000 shares of Company XYZ stock, which pays $0.20 per year in dividends. In total,...
A qualified pre-retirement survivor annuity (QPSA) is a company-sponsored death benefit that provides the employee's surviving spouse with an annuity payment should the employee die before receiving ...
In stock trading, a rebate occurs when a short seller has taken a short position in a stock that then pays a dividend before the settlement date. The rebate is the dividend that the short seller is r...
The record date is the date used to determine the holders of a security who are entitled to receive a dividend or distribution. When a company is preparing to distribute dividends to shareholders, i...
A special dividend, also known as an extra dividend, is a one-time distribution of corporate earnings to company shareholders, which usually stem from exceptional profits during a given quarter or pe...
Dividends are a distribution of corporate earnings to shareholders and usually take place in one of two forms -- cash or stock. A stock dividend is the latter of these two kinds of dividends. Each or...
A variable annuity is a contract sold by an insurance company. The contract provides the holder with future payments based on the performance of the contract's underlying securities. The insurer guar...
A variable-rate certificate of deposit (CD) is a CD with an interest rate that can change. A CD is an investment whereby the investor deposits a certain amount of money with a bank or credit union, ...
XD is a symbol to indicate that a security is trading ex-dividend. The ex-dividend date is the day on which all shares bought and sold no longer come attached with the right to receive the most rece...
Yield on cost (YOC) is an investment's annual dividend divided by the original purchase price of the investment. To calculate yield on cost, divide the annual dividend by the per-share price you ini...