equities vocabulary part IV Series 7 outline

Declared dividends

1. dividends are a distribution of current year or prior year earnings/profits
2. payments are made to stockholders in the form of cash or more shares of stock of the issuing company
3. a dividend is only paid if the board of directors votes and declares the dividend
4. record date, date on which all of the owners will be entitled to the dividend.
5. dividend payment date,the board determine the date the checks will be sent
6. to receive the dividend the person must own the stock on the record date-they are the holder of record
7. cash dividend, money distribution that is usually a portion of the earnings-profits of a corporation after taxes are paid 
8. a dividend can be paid even if there are no earnings that year if the company has retained earnings left over from previous years
9. receiving cash dividends doesn't increase or decrease a person's holdings in a company
10. paying a cash dividend usually reduces a company's share price because the payment reduces the company's assets and net worth
11. cash dividends if paid are usually paid quarterly 
12. a stock dividend,  is the distribution of more shares of stock to current shareholders. The company issues more shares of stock to shareholders instead of paying a cash dividend. It is a distribution of earnings-the earnings are used to buy authorized, unissued shares from the company which the company distributes instead of cash
13. when cash or stock dividends are distributed to shareholders, the price of the shares is reduced in the open market
14. when a stock dividend is sent there is an increase in the number of shares outstanding but price decreases, total market capitalization remains the same. Shareholder value-remains same. Total value and percent ownership-same. The chance is improved for the total value of  a shareholder's holdings to increase. 

• An investor owns 200 shares of common stock in a corporation. Co. paid $. 50 in dividends every quarter for the last three years. How much did the investor receive in dividends last year? $400. .50x4 quarters=2.00. 2.00x200=400.00 in dividends received for the year

Stock splits

• increase the number of shares outstanding, earnings-same, price of underlying stock decreases
• 100% stock dividend or 2 for 1 stock split. 300 shares with 100% stock dividend-investor would own 600 shares and price per share would decrease by half
• 25% stock dividend=5 for 4 split. 100 shares then investor has 125 shares. If the investor owned 400 shares and received a 25% dividend, the investor would now have 500 shares. 
• a company declared a 50% stock dividend to all holders of record on April 29. That would equate to which of the following? 3 for 2. After the dividend, the owner would have 50% more. 150 shares now from100 shares previously.

Current yield

1. the percentage of return an investor receives based upon the dividends/current market price
2. The market value of a corporation's common stock and current yield has been going up. Which of the following statements would be true? The dividends of the corporation have been increasing. If the current market price remains the same and the yield rises, the stockholders would receive more income. If the dividend was $1 and market price was $20, current yield would be 5% (1/20). If the market price stays the same and the dividend goes up $2 the current yield would be (2/20)=10%. 

Voting rights

1. the holders of common shares of stock have the right to vote on issues such as major acquisitions and mergers and issuing new stock as well as the election of the board of directors
2. holders can attend an annual meeting to cast their votes or they can mail in a proxy 
3. preferred stockholders do not have the same voting rights as common stockholders though they may vote on certain issues that may affect their ownership

Statutory voting

1. allows a stockholder to cast one vote per share for each director to be elected and each issue to be voted upon. 
2. If the articles of incorporation mandate one vote for each director then the minority stockholders would not be well represented
3. The minority stockholders would control all of the voting power and the ability to elect the entire board of directors
4. Which of the following best describes statutory voting by the common shareholders in an election for the board of directors? Each shareholder can cast only one vote per share per director being elected. Statutory voting is one vote per share per director being elected whereas cumulative voting is the amount of shares x the directors being elected

Cumulative voting

1. allows stockholders to combine all of their votes and vote in any manner they choose. 
2. Depending on the # of directors being selected, stockholder can cast a # of votes equal to the number of directors running x the # of shares owned by the shareholder for one or more directors
3. this allows the minority shareholders to get better representation on the board of directors because they can band together and cast all their votes for one director
4. the purpose of cumulative voting is? to allow small shareholders the chance to gain representation. 
5. allows shareholders who do not control a significant amount of shares to voice their opinions to the board of directors

Voting by proxy 

1. a proxy solicitation, is a process that allows all absentee voting owners of a corporation-stockholders to vote for the board of directors
2. the voters can also vote for the auditor who reviews the corporation's accounting records and practices
3. the corporation will hire a proxy service to send a proxy to each shareholder
4. the proxy allows holders to cast their votes
5. if investors prefer not to vote by proxy they may attend the open meeting held by the corporation where the vote will take place
6. proxy form, is a document that is signed by a holder and appoints an agent to vote as the holder instructs
7. all public corporations must send out a proxy form to each registered stockholder whenever a vote is needed