html5-img
1 / 31

COMMON STOCK

COMMON STOCK. CHAPTER FIVE. Practical Investment Management Robert A. Strong. Outline. Corporations, Shares, and Shareholder Rights Corporations Shares Shareholder Rights The Mystique of Dividends Types of Dividends Special Distributions The Dividend Payment Procedure

catherine-sallas
Télécharger la présentation

COMMON STOCK

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. COMMON STOCK CHAPTER FIVE Practical Investment Management Robert A. Strong

  2. Outline • Corporations, Shares, and Shareholder Rights • Corporations • Shares • Shareholder Rights • The Mystique of Dividends • Types of Dividends • Special Distributions • The Dividend Payment Procedure • Why Dividends Do Not Matter

  3. Outline • Stock Splits • Forward and Reverse Splits • Why Stock Splits Do Not Matter • Why Firms Split Their Stock • Stock Splits vs. Stock Dividends • The Financial Page Listing • The Basic Information • Footnotes and Symbols

  4. Outline • Categories of Stock • Blue Chip Stocks • Income Stocks • Cyclical Stocks • Defensive Stocks • Growth Stocks • Speculative Stocks • Penny Stocks • Category Overlap • A Note on Stock Symbols

  5. Corporations, Shares, and Shareholder Rights • People who own stock have an equity interest in the organization. • If a business has shares of stock, it is organized as a corporation rather than a proprietorship or a partnership. • The shares of some corporations are closely held, while others are publicly held. • The two types of stock are common stock and preferred stock.

  6. Corporations, Shares, and Shareholder Rights Shareholder Rights • the right to receive declared dividends on a pro rata basis • the right to vote - Some companies have more than one class of stock. • the right to maintain ownership percentage - The mechanics of the preemptive right are accomplished by a rights offering.

  7. cash dividends - paid in cash Some firms have an optional dividend reinvestment plan. The Mystique of Dividends: Types of Dividends

  8. The Mystique of Dividends: Types of Dividends Selected Dividend Reinvestment Plans DISCOUNT FROM FIRM MARKET PRICE Chase Manhattan Bank (CMB,NYSE) 5% Central Maine Power (CTP, NYSE) 5% Green Mountain Power (GMP, NYSE) 5% Hibernia Corp. (HIB, NYSE) 5% York Financial (YFED, NASDAQ)10%

  9. The Mystique of Dividends: Types of Dividends Insert Figure 5-5 here.

  10. stock dividends - paid in additional shares of stock • property dividends - the pro rata distributionof a physical asset The Mystique of Dividends: Types of Dividends

  11. The Mystique of Dividends: Special Distributions • spin-offs - a parent firm divests itself of a subsidiary, and all the shares in the subsidiary are distributed proportionally to the shareholders in the parent • split-offs - a parent firm divests itself of a subsidiary, and the shareholders must make a choice between keeping shares in the parent, or exchanging them for shares in the separated subsidiary

  12. The Mystique of Dividends: Special Distributions • An increasingly common type of recapitalization is the issuance of shares called tracking stock. • These shares track the performance of a subsidiary, and in many respects, are just a new class of shares.

  13. The Chronology of Events 1. date of declaration Ex-dividend date (2 business days prior to the date of record) 2. date of record 3. date of payment The Dividend Payment Procedure

  14. The Dividend Payment Procedure • A dividend paid in accordance with a previously announced corporate policy is a regular dividend. • Companies usually pay dividends quarterly. • A firm that wishes to make an extra distribution of cash to the shareholders does so through a special dividend, also called an extra or extraordinary dividend.

  15. On the ex-dividend date, share prices tend to fall by about the amount of the dividend. Why Dividends Do Not Matter • Paying dividends reduces the amount in a firm’s checking account, and hence the shares are worth less.

  16. Stock Splits: Forward and Reverse Splits • A stock split is an accounting decision to change the number of shares outstanding without selling any more to the public. • With a forward split, also called a regular way or direct split, shareholders end up with a greater number of shares than before the split. • With a reverse split, the number of existing shares is reduced.

  17. Stock Splits: Why Stock Splits Do Not Matter The value of a firm cannot be increased by splitting, or combining, its shares.

  18. Stock Splits • The primary motivation for a stock split is usually a desire to reduce the share price. • Large reverse splits often reduce the number of shareholders. • The difference between a stock split and a stock dividend is purely an accounting phenomenon. With a stock split, the par value of the stock changes by the split factor. With a stock dividend, the par value is not affected.

  19. Footnotes and Symbols boldface type, underlined, , , , s, n, dd, g, x, ... The Financial Page Listing 52 Weeks Yld Vol Net Hi Lo Stock Sym Div % PE 100s Hi Lo Close Chg 25.38 20.38 AtlanEngy ATE 1.54 7.2 12 371 21.25 20.88 21.25 +.13

  20. new 52-week high  new 52-week low cc PE ratio > 100 dd loss in the most recent four quarters g dividends and earnings in Canadian dollars n newly issued in the past 52 weeks pf preferred stocks s stock split/stock dividend > 10% in past 52 weeks wt warrant x ex-dividend The Financial Page Listing

  21. Categories of Stock • A blue chip stock usually has a long history of uninterrupted dividends. • Income stocks are those that historically have a higher-than-average payout ratio (the proportion of net income after taxes paid as a dividend). • A cyclical stock is one whose fortune is directly tied to the state of the overall national economy.

  22. Categories of Stock Insert Table 5-2 here.

  23. Categories of Stock Insert Table 5-3 here.

  24. Categories of Stock Insert Table 5-4 here.

  25. Categories of Stock • A defensive stock is largely immune to changes in the economy. • Growth stocks reinvest most of their earnings rather than paying them out as dividends and may be good candidates for above-average returns. • A speculative stock has a high probability of a loss and a small probability of a large profit. • Penny stocks refer to unusually risky, especially inexpensive shares.

  26. Categories of Stock Insert Table 5-5 here.

  27. Categories of Stock • Category overlap: The stock categories are not mutually exclusive. • A note on stock (ticker) symbols: - are usually between one and four letters - the letter after a decimal indicates the class of stock - under the NASDAQ system, the last letter of a five-letter symbol indicates what type the security is

  28. Categories of Stock Insert Table 5-6 here.

  29. Review • Corporations, Shares, and Shareholder Rights • Corporations • Shares • Shareholder Rights • The Mystique of Dividends • Types of Dividends • Special Distributions • The Dividend Payment Procedure • Why Dividends Do Not Matter

  30. Review • Stock Splits • Forward and Reverse Splits • Why Stock Splits Do Not Matter • Why Firms Split Their Stock • Stock Splits vs. Stock Dividends • The Financial Page Listing • The Basic Information • Footnotes and Symbols

  31. Review • Categories of Stock • Blue Chip Stocks • Income Stocks • Cyclical Stocks • Defensive Stocks • Growth Stocks • Speculative Stocks • Penny Stocks • Category Overlap • A Note on Stock Symbols

More Related