SIE (Training Consultants v3.5, 2025): Ch. 1 Equity Securities, Sec. 3 - Equity Security Classifications

Blue Chip Stock

Stock issued by a nationally known company with a reputation for quality management, products, and services; typically pays moderate, consistent dividends.

Dividend Payout Ratio

The percentage of net profits a company pays out as dividends; many Blue Chip companies maintain approximately 50%.

Growth Stock

Stock issued by a company expected to have above-average revenue and earnings growth; usually pays little or no dividend and has high price volatility.

Emerging Growth Company

A fast-growing company with annual gross revenues under $1.235 billion in its most recent fiscal year; characterized by high risk, high return, and high failure rates.

Cyclical Stock

Stock heavily affected by normal business and economic cycles; rises and falls with the economy (e.g., auto, steel, appliance, housing companies).

Countercyclical Stock

Stock that moves in the opposite direction of the economy (e.g., gold mining companies, budget retailers, temp agencies).

Defensive / Non-Cyclical Stock

Stock resistant to business cycles and market fluctuations; provides stable, consistent earnings (e.g., tobacco, utilities, food, pharmaceutical, auto repair companies).

Utility Stock

Stock of a company providing essential services like electricity, gas, and water; usually pays above-average dividends, carries high leverage, and is sensitive to interest rate changes.

Special Situations Stock

Undervalued stocks with potential for sudden price increases due to events such as new management, new products, or discovery of resources.

American Depositary Receipt (ADR)

A U.S. receipt representing foreign stock held by an American bank; traded in dollars, pays dividends in dollars, and has no voting rights.

What is Blue Chip Stock?

Stock from a nationally known, high-quality company that pays moderate, consistent dividends.

What is the typical dividend payout ratio for Blue Chip companies?

Around 50% of net profits.

What is Growth Stock?

Stock expected to have above-average revenue and earnings growth, typically with low or no dividends and high volatility.

What defines an Emerging Growth Company?

A fast-growing company with annual gross revenues under $1.235 billion; high risk, high return, high failure rate.

What is Cyclical Stock?

Stock that rises and falls with the economy, such as auto, steel, appliance, and housing companies.

What is Countercyclical Stock?

Stock that moves opposite to the economy, e.g., gold mining companies, budget retailers, temp agencies.

What is Defensive / Non-Cyclical Stock?

Stock resistant to business cycles and market fluctuations, providing stable and consistent earnings (e.g., tobacco, utilities, food, pharmaceuticals, auto repair).

What are the key characteristics of Utility Stocks?

Provide essential services, above-average dividends, high leverage, sensitive to interest rates, less capital appreciation.

What are Special Situations Stocks?

Undervalued stocks that may increase dramatically due to events like new management, new products, or resource discoveries.

What is an American Depositary Receipt (ADR)?

A U.S. receipt representing foreign stock, traded in dollars, pays dividends in dollars, has no voting rights, and is not callable.