The new investor’s glossary: D and E

Fsp Invest, 18 Dec. 2013

Tags: investing, glossary, terminology, derivatives, dividend, earnings, equity, flotation, investment glossary

Once you start dipping your toe into investments, you’ll come across a large amount of terminology that may leave you feeling like you’re a bit out your depth. But as with most things in life, it’s not as difficult as it first appears. Read on to uncover all the terms you need to know beginning with D and E…

Learning about the stock market and investing shouldn’t put you off, the research team at Red Hot Penny Shares explains…

By getting to grips with the basic investing lingo, you’ll be off on the right track…

Your vital investment glossary

Derivatives: This is a contract whose value is dependent on the performance of some underlying asset or market indicator. This includes single stock futures and contracts for difference (CFDs).

Dividend: This is part of a company’s profit distributed to shareholders. This usually happens twice a year. The dividend paid halfway through the company’s financial year is the interim dividend. The dividend paid at the end of a company’s financial year is the final dividend.

Dividend yield: This is the ratio of the latest dividend a company’s paid divided by the share price. This is multiplied by 100 to give you a percentage.

Earnings: This is a company’s net profits.

Earnings per share (EPS): This is a company’s net profit divided by the number of ordinary shares in issue. When looking at EPS, you want to see growth over the years. The market usually takes a drop in EPS as a negative signal.

Equity: This is ordinary shares of a company that you would buy through your stock broker. Amongst other things, owning shares comes with voting rights.

Ex dividend/rights: When a share is ex-dividend it means that if you buy the share, you will not receive the dividend that the company is about to pay.

Flotation: This is when a company first lists on a stock exchange, like the JSE and issues shares.

You can check out C here.

So there you have it, the terminology you need to know beginning with D and E.

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