A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business. The current year profit as well as the retained earnings of previous years are available for distribution; a corporation is usually prohibited from paying a dividend out of its capital. Distribution to shareholders may be in cash or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or by share repurchase. In some cases, the distribution may be of assets.
In finance, equity is an ownership interest in property that may be offset by debts or other liabilities. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets owned. For example, if someone owns a car worth $24,000 and owes $10,000 on the loan used to buy the car, the difference of $14,000 is equity. Equity can apply to a single asset, such as a car or house, or to an entire business. A business that needs to start up or expand its operations can sell its equity in order to raise cash that does not have to be repaid on a set schedule.
A mutual fund is an investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe, and the open-ended investment company (OEIC) in the UK.
In finance, a convertible bond, convertible note, or convertible debt is a type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value. It is a hybrid security with debt- and equity-like features. It originated in the mid-19th century, and was used by early speculators such as Jacob Little and Daniel Drew to counter market cornering.
A real estate investment trust is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, including office and apartment buildings, warehouses, hospitals, shopping centers, hotels and commercial forests. Some REITs engage in financing real estate.
Preferred stock is a component of share capital that may have any combination of features not possessed by common stock, including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument. Preferred stocks are senior to common stock but subordinate to bonds in terms of claim and may have priority over common stock in the payment of dividends and upon liquidation. Terms of the preferred stock are described in the issuing company's articles of association or articles of incorporation.
Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other Commonwealth realms. This type of share gives the stockholder the right to share in the profits of the company, and to vote on matters of corporate policy and the composition of the members of the board of directors.
In economics and accounting, the cost of capital is the cost of a company's funds, or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". It is used to evaluate new projects of a company. It is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet.
The return on equity (ROE) is a measure of the profitability of a business in relation to its equity; where:
Return of capital (ROC) refers to principal payments back to "capital owners" that exceed the growth of a business or investment. It should not be confused with Rate of Return (ROR), which measures a gain or loss on an investment. It is essentially a return of some or all of the initial investment, which reduces the basis on that investment.
An open-ended investment company or investment company with variable capital is a type of open-ended collective investment formed as a corporation under the Open-Ended Investment Company Regulations 2001 in the United Kingdom. The terms "OEIC" and "ICVC" are used interchangeably with different investment managers favouring one over the other. In the UK OEICs are the preferred legal form for new open-ended investment over the older unit trust.
A split capital investment trust (split) is a type of investment trust which issues different classes of share to give the investor a choice of shares to match their needs. Most splits have a limited life determined at launch known as the wind-up date. Typically the life of a split capital trust is five to ten years.
A venture capital trust or VCT is a tax efficient UK closed-end collective investment scheme designed to provide venture capital for small expanding companies, and income and/or capital gains for investors. VCTs are a form of publicly traded private equity, comparable to investment trusts in the UK or business development companies in the United States. They were introduced by the Conservative government in the Finance Act 1995 to encourage investment into new UK businesses.
In finance, a Class B share or Class C share is a designation for a share class of a common or preferred stock that typically has strengthened voting rights or other benefits compared to a Class A share that may have been created. The equity structure, or how many types of shares are offered, is determined by the corporate charter.
Pengrowth Energy Corporation was a Canadian oil and natural gas company based in Calgary, Alberta. Established in 1988 by Calgary entrepreneur James S Kinnear, it was one of the largest of the Canadian royalty trusts ("Canroys"), with a market capitalization of US$4.12 billion at the end of 2007. Its assets were approximately evenly distributed between oil and natural gas.
An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages include an ability to:
A financial ratio or accounting ratio states the relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm's creditors. Financial analysts use financial ratios to compare the strengths and weaknesses in various companies. If shares in a company are traded in a financial market, the market price of the shares is used in certain financial ratios.
In finance, the notion of traditional investments refers to putting money into well-known assets with the expectation of capital appreciation, dividends, and interest earnings. Traditional investments are to be contrasted with alternative investments.
A royalty fund is a category of private equity fund that specializes in purchasing consistent revenue streams deriving from the payment of royalties. One growing subset of this category is the healthcare royalty fund, in which a private equity fund manager purchases a royalty stream paid by a pharmaceutical company to a patent holder. The patent holder can be another company, an individual inventor, or some sort of institution, such as a research university.
American Capital, Ltd. was a publicly traded private equity and global asset management firm, trading on NASDAQ under the symbol “ACAS” from 1997 to 2017 and a component of the S&P 500 Index from 2007 to 2009. American Capital was sold to Ares Management in 2017 at a sale price that totaled $4.1 billion. For those investors who bought American Capital stock in its August 29, 1997 IPO, and held their shares through the sale of American Capital on January 3, 2017, they received a 14% compounded annual return including dividends.
