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COMMON STOCK
Outline
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Outline
Stock Splits
Forward and Reverse Splits Why Stock Splits Do Not Matter Why Firms Split Their Stock Stock Splits vs. Stock Dividends
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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
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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.
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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.
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cash dividends - paid in cash Some firms have an optional dividend reinvestment plan.
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FIRM Chase Manhattan Bank (CMB,NYSE) Central Maine Power (CTP, NYSE) Green Mountain Power (GMP, NYSE) Hibernia Corp. (HIB, NYSE)
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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
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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.
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3. date of payment
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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.
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Paying dividends reduces the amount in a firms checking account, and hence the shares are worth less.
On the ex-dividend date, share prices tend to fall by about the amount of the dividend.
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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.
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Stock Splits
The primary motivation for a stock split is usually a desire to reduce the share price.
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Categories of Stock
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.
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Categories of Stock
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Categories of Stock
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Categories of Stock
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Categories of Stock
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.
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Categories of Stock
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Categories of Stock
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
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Categories of Stock
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Review
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Review
Stock Splits
Forward and Reverse Splits Why Stock Splits Do Not Matter Why Firms Split Their Stock Stock Splits vs. Stock Dividends
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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
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