See: Diversified
Investment Company
Diversified
Investment Company
Term used for either closed or open-ended mutual funds or unit trusts
that invest in many different kinds of securities and companies. Under
the Investment Company Act of 1940, an investment company, with respect
to 75% of its portfolio, may not have more than 5% of its assets invested
in the securities of any one issuer and may not own more than 10% of the
voting shares of any one issuer.
See: Diversification
Divestiture
Disposal of an investment by sale, liquidation or other means. This legal
term is also used to describe a corporation's systematic distribution
of large blocks of another company's stock which were being held as an
investment.
See: Liquidation
Divided
Account
A type of a new issue syndicate--also known as a "Western Account"--where
all members are liable for selling a percentage of the issue commensurate
to their participation. The member's liability ends once it has sold its
percentage of the issue.
See: Western
Account
Dividend
Distribution of a company's earnings to its shareholders, usually in the
form of a quarterly check. The company's board of directors authorize
and determine the amount of the dividend. Dividends are taxed as income
in the year they are received by the shareholder. A mutual fund dividend
is paid out of income and the shareholder's tax is dependent on whether
the distributions originated from interest income, capital gains, or dividends
received by the fund.
See: Cash
Dividend; Cum-Dividend;
Dividend Record; Dividend
Reinvestment Plan; Dividends Payable;
Equalizing
Dividend; Ex-Dividend;
Extra
Dividend; Omitted
Dividend; Stock
Dividend
Dividend
Capture
Investment strategy whereby the investor buys the stock roughly two weeks
before it goes ex-dividend and then sells it about two weeks after it
has gone ex-dividend in order to collect the dividend and make a small
profit on the trade. On the stock's ex-dividend date, its price will drop
by the amount of the dividend. The theory is that the stock's price will
work its way back up to the price it was at before the ex-dividend date.
This allows the investor to sell slightly above the purchase price. Thus,
the investor is able to collect the dividend and realize a small capital
gain in about four weeks. Also referred to as a "dividend rollover
plan."
See: Dividend;
Ex-Dividend
Dividend
Discount Model
Mathematical model used to identify undervalued stocks. It determines
the price that a stock should be selling at based on the discounted value
of projected future dividend payments.
See: Dividend
Dividend
In Arrears
Cumulative preferred stock dividends that are due but have not been paid.
See: Cumulative
Preferred Stock; Dividend
Dividend
Payout Ratio
Percentage of earnings paid in cash to shareholders. It is calculated
by dividing the dividends paid on common stock by the earnings per share.
In general, a corporation with a higher payout ratio will be more mature.
A company in a growth phase usually reinvests all earnings and pays little
or no dividends.
See: Dividend;
Earnings
Per Share
Dividend
Record
A Standard & Poor's publication that gives data on corporate payment
histories and policies.
See: Dividend
Dividend
Reinvestment Plan (DRIP)
A program in which a dividend paying company (especially mutual funds)
will automatically reinvest an investor's dividend to purchase additional
shares of the company's stock. The dividend is still taxable by the IRS.
In participating in a DRIP, investors use dollar cost averaging to increase
their amount of capital in the stock.
See: Dollar
Cost Averaging
Dividend
Requirement
The amount of annual earnings needed to pay a preferred stock's contracted
dividend.
See: Earnings
Dividend
Yield
The annual percentage of return that the dividend provides to the investor
on either common or preferred stock-often referred to as just "yield."
The yield is calculated by dividing the annual cash dividend per share
by the stock's market price at the time of purchase.
See: Yield
Dividends
Payable
Dollar amount of dividends that are obligated to be paid once a dividend
is declared by the board of directors. The dollar amount is listed as
a liability in the annual and quarterly reports.
See: Dividend
Record
DJIA
(Dow Jones Industrial Average)
Average of the prices of 30 well-known, predominantly blue-chip, industrial
stocks. The following 30 stocks make up the DJIA as of November, 1999:
Alcoa; American Express; AT&T; Boeing; Caterpillar; Citigroup; Coca
Cola; DuPont; Eastman Kodak; Exxon Mobil; General Electric; General Motors;
Home Depot; Honeywell International; Hewlett-Packard; IBM; Intel; International
Paper; J.P. Morgan; Johnson & Johnson; McDonald's; Merck; Microsoft;
3M; Philip Morris; Proctor & Gamble; SBC Communications; United Technologies;
Wal-Mart; Walt Disney.
See: DJTA;
DJUA
DJTA
(Dow Jones Transportation Average)
Average of the prices of 20 representative transportation companies.
See: DJIA;
DJUA
DJUA
(Dow Jones Utility Average)
Average of the prices of 15 geographically representative gas and electric
utility companies.
See: DJIA;
DJTA
DK
(Don't Know Notice)
Brokerage lingo used when dealers, or dealer to custodian, compare a transaction
and the trade is unknown by one side. When a dealer receives a comparison
for a trade that it does not recognize, the dealer will send the other
party a DK notice.
DNR
(Do Not Reduce)
A designation used on an order (specifically--buy limit, sell stop and
sell stop-limit orders) to specify that an order's limit price should
not be reduced by the amount of the dividend. When the stock goes ex-dividend,
its price is reduced by the amount of the cash dividend. DNRs only apply
to cash dividends.
See: Cash
Dividend; Ex-Dividend;
Stop
Limit Order; Stop
Order
