Reference
Glossary of dividend and income-equity terms.
The vocabulary that turns up in CFA Level II equity-valuation chapters, in S&P Dow Jones Indices methodology, and in income-fund prospectuses. Each entry is short and links to longer treatment where one exists.
- AFFO
- Adjusted Funds From Operations. The REIT-specific cash-flow metric: net income plus depreciation, minus recurring capital expenditure. The denominator of the REIT payout ratio. See the payout ratio page.
- Aristocrat
- An S&P 500 Dividend Aristocrat is an index member that has raised its dividend annually for at least 25 consecutive years. See the aristocrats and traps page.
- CAGR
- Compound Annual Growth Rate. The constant annual rate that, applied for n years, takes a starting value to an ending value. Preferred over arithmetic-mean growth for compounded series.
- Declaration date
- The date a company’s board announces an upcoming dividend, including the per-share amount, ex-date, and payment date.
- DRIP
- Dividend Reinvestment Plan. Automatic reinvestment of cash dividends into additional shares of the paying company. See the DRIP page.
- Ex-dividend date
- The first date on which the stock trades without entitlement to the upcoming dividend. Buyers on or after this date do not receive the dividend; sellers retain it. The share price typically drops by approximately the dividend amount on the ex-date.
- Forward yield
- Projected next-twelve-months dividend per share divided by current share price. The right yield variant for forward-looking buy decisions. See the formula page.
- Free cash flow
- Operating cash flow minus capital expenditure. The denominator of the FCF payout ratio. The most rigorous measure of dividend-paying capacity for non-financial businesses.
- Gordon Growth Model
- A constant-growth dividend valuation model: fair value = D₁ / (r − g), where D₁ is next year’s dividend, r is the required return, and g is the perpetual dividend growth rate. A long-run abstraction useful as a sanity check.
- Payment date
- The date on which the dividend is actually paid to shareholders of record.
- Payout ratio
- Annual dividend per share divided by earnings per share. The single best dividend-cut warning. See the payout ratio page.
- Qualified dividend
- A US tax classification: dividends from US corporations and qualified foreign corporations, held for the requisite period, taxed at long-term capital-gains rates rather than ordinary income rates.
- Record date
- The date on which the company finalises the list of shareholders entitled to the upcoming dividend. Typically one business day after the ex-date in T+1 settlement regimes.
- REIT
- Real Estate Investment Trust. A corporate structure (US, UK, EU equivalents) that distributes the substantial majority of taxable income as dividends in exchange for pass-through tax treatment. AFFO payout is the relevant metric.
- Special dividend
- A one-time, non-recurring dividend distinct from the regular dividend. Often paid following an asset sale or in lieu of a buyback. Excluded from yield and CAGR calculations.
- Total return
- Capital appreciation plus reinvested dividends. Approximately yield + dividend growth + multiple expansion. Over long horizons, the multiple-expansion component averages near zero; yield + growth dominate.
- Trailing yield
- Sum of the four most-recent quarterly dividends divided by current share price. The figure displayed on most brokerage screens. Hybrid (past numerator, present denominator); useful for cross-stock comparison.
- Yield
- Annual dividend per share divided by share price. The most-cited income-equity ratio. Comes in trailing, forward, and yield-on-cost variants.
- Yield gap
- The difference between the average dividend yield on a market index and the yield on a long-dated government bond. A relative-value indicator for income investors choosing between equities and bonds.
- Yield on cost (YoC)
- Annual dividend per share divided by your cost basis per share. The only yield variant that measures what your own position earns. Independent of current market price.
- Yield trap
- A stock whose high yield reflects already-priced concerns about dividend sustainability. Distinguished from a quality dividend-payer by the five-question screen on the aristocrats and traps page.