Day 1 - FBLA Test Prep [Sec & Inv]

Corporate body authorized to declare a dividend

Board of Directors

Party entitled to receive the dividend when shares are bought on or after the ex-dividend date

The seller

Four key dividend dates in chronological order (D-E-R-P)

1. Declaration date, 2. Ex-dividend date, 3. Record date, 4. Payable date

Most common form of dividend payment

Cash dividend

Common stock characteristics: voting rights, dividends, and liquidation priority

Voting: Yes; Dividend: Variable and not guaranteed; Liquidation priority: Lowest (residual claim behind debt and preferred stock)

Preferred stock characteristics: voting rights, dividends, and liquidation priority

Voting: Typically none; Dividend: Fixed or stated rate paid prior to common; Liquidation priority: Senior to common stock, junior to debt

Cumulative preferred stock

A share class requiring all omitted past dividends (dividends in arrears) to be paid before any dividend distribution to common stockholders

Stock dividend

A corporate distribution paid to shareholders in the form of additional shares rather than cash

Market price adjustment of a stock on the ex-dividend date

The opening price typically decreases by approximately the amount of the declared dividend payout

Equity security offering higher capital growth potential (common vs. preferred)

Common stock

Liquidation priority between common stock and preferred stock

Preferred stock has priority over common stock

Liquidation ranking of bondholders relative to equity holders

Ahead of both preferred and common stockholders, because bondholders are creditors