Synthesis

Now that you understand the different types of equity securities, the next unit covers how to analyze them.

What We Covered

• Common stock (domestic): Ownership, key shareholder rights (voting, preemptive, inspect, transfer), voting methods (statutory vs. cumulative), proxy voting
• Common stock (foreign): Currency risk, political/sovereign risk, foreign tax withholding, foreign tax credit
• American Depositary Receipts (ADRs): U.S.-traded foreign stocks in dollars, sponsored vs. unsponsored, do NOT eliminate currency risk
• Preferred stock: Hybrid security with fixed dividends, par value significance, interest rate sensitivity, generally no voting rights
• Types of preferred: Cumulative, participating, convertible, callable, floating rate
• Yield trade-off principle: Features benefiting investors allow lower dividend rates; features benefiting issuers require higher rates
• Capital structure and liquidation priority: All debt before any equity; secured before unsecured; preferred before common