If you are into dividend stocks you will know that you need to know the language otherwise you will get lost.
Below are some easy to follow definitions and terms that you may hear when people talk about stocks.
Stock – Is an ownership share in a company/corporation. Each share denotes a part of ownership
Stock Exchange – An organization that serves as a market to trade stocks and bonds. There are stock exchanges all over the world. Two examples of them here in the US are the New York Stock Exchange (NYSE) and National Association of Securities Dealers Automated Quotations (NASDAQ).
Ask Price – The price you are asked to pay when you buy a stock
Bid Price – The price that is currently being offered to buy stock. This would be the price you could currently sell shares for
Blue Chip Stocks – stocks in large stable companies.
Book Value – total liquid value of the company divided by the amount of shares outstanding.
Price/Earnings Ratio – Current share price divided by the earnings per share from the past 12 months.
S&P 500 – Weighted index of the 500 largest US corporations
Shares Outstanding – The total amount of shares issued by a corporation
Small Cap – companies worth between 300 million and 2 billion
Mid Cap – companies worth between 2 and 10 billion
Large Cap – companies worth over 10 billion
Dogs of the Dow – A strategy of investing in the 10 highest dividend yielding stocks of the DOW each year. The “Dogs” have outperformed the rest of the DOW by an average of 3% over the past 50 plus years.
Earnings Per Share (EPS) – The profit of the company dividend by the shares outstanding. For example, if a company has 10 billion dollars of profit, and 5 billion shares of stocks, their EPS would be $2 a share.
Beta – a measure of an assets risk in relation to the market. A stock with a beta of 1.5 moves on average 1.5 times the average of the market. Beta is measure of movement and not stock volatility. Also, stocks may have a larger beta for down moves than up moves or vice versa.
That is a start on definitions on terms related to dividend stocks.
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To learn about the dividend tax break, visit here!
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