The definitions provided in this glossary have been obtained from various internet sources. This information is provided for convenience only. It is not intended to replace the expert advice of a financial advisor, nor should it be relied upon to make an investment decision. Click on the letters shown below to browse through our alphabetized list of glossary terms and corresponding definitions.
This term is also known as “AFFO” and is a non-GAAP (Generally Accepted Accounting Principles) measure to determine a real estate company’s operating performance. It is calculated by adding back to net income available to common stockholders items such as depreciation and property sale losses, deducting property sales gains, and adjusting for unique revenue and expense items that are not pertinent to ongoing operating performance. Real estate industry analysts generally use AFFO when analyzing the operating results of a public real estate company.
A balance sheet is a statement of financial position at a point in time and provides detailed information about a company’s assets (items owned that carry monetary value), liabilities (amounts owed to others) and shareholders’ equity (net worth or capital). Assets – liabilities = net worth.
Callable or Call Date:
This is the date the issuer of preferred stock or bonds may redeem those securities by buying them back at a pre-determined price.
This term refers to cash, common stock, and bonds funding business activities. In the simplest terms, it refers to the financial resources available for use. The term is also used to discuss a company’s “cost of capital,” which means the costs associated with acquiring and holding this capital.
Credit Rating or Credit Quality:
This is an assessment of the creditworthiness of a corporation that is used to determine financing rates. Companies with poor credit have greater difficulty obtaining financing and typically pay more to access financing because of the increased risk of defaulting on financial obligations.
This is a measure of the return on a common stock, preferred stock, or bonds on any given trading day. For a common stock or preferred stock, it is calculated by dividing the annual dividend amount by the share price. For a bond, it is calculated by dividing the annual interest payment per bond by the current bond price.
Depreciation and Amortization:
This is a non-cash expense that is recorded on an income statement to allocate the costs of an asset over its useful life. How much is depreciated or amortized is based on the estimated useful life of the assets.
This is the distribution a company makes to shareholders and may be paid in cash or shares of stock. The amount to be paid is decided by the Board of Directors on a periodic basis and is generally paid quarterly (except in the case of Realty Income who pays the dividend monthly).
This is a metric that helps an investor determine the amount of cash return from dividends. It is expressed as a percentage of the share price. The formula to calculate this is: annualized dividend per share divided by share price.
When a company declares a dividend, it sets a date when a shareholder must be registered or recorded as an owner of its stock in order to receive the dividend. For Realty Income, the ex-dividend date is two days before the record date. On that date, the stock price is typically adjusted to account for the dividend amount. If an investor wants to receive the next month’s dividend from Realty Income, the investor needs to buy shares at least three business days prior to the record date, which is typically the first business day of the month.
A building that is not attached to another structure and generally sits on its own piece of land. The properties that Realty Income owns are primarily freestanding buildings.
An income statement shows how much revenue a company earned over a specific period of time. It also shows the costs and expenses associated with earning those revenues (i.e. running the business to generate revenue). The “bottom line” shows the company’s “net profits”, which is represented by net income available to common stockholders on the income statement. If an investor wants to know how expenses impact the amount of revenue available to pay dividends, he/she would examine the income statement.
Investment Grade Securities:
Investment grade securities are ranked in one of the four highest rating categories of nationally recognized rating agencies (e.g. between AAA and BBB by Standard & Poor’s and Fitch Ratings, or between Aaa and Baa by Moody’s Investors Services). Receiving an investment grade rating on a company’s securities is important because the higher the credit rating, the lower the financing costs due to the lower risk of default by the corporate issuer.
This is the practice of borrowing money to make an investment in order to enhance potential returns. Leverage can have a positive impact on a company’s earnings but can also lead to liquidity problems if too much leverage is used, or the yield on the investment does not cover the borrowing costs.
Maturity or Maturity Date:
This term is typically associated with notes and bonds. It refers to the date in which a security will mature, and the principal amount, or face value, of the security will be returned to the investor.
Market Capitalization or Equity Market Capitalization:
This is the market value of a company, determined by multiplying the price of its shares by the number of shares outstanding. The market cap of a company reflects its equity value.
Total Market Capitalization:
The total value of all of a company’s outstanding securities (e.g. common stock, preferred stock, notes and bonds).
Stands for New York Stock Exchange and is the trading floor for many public companies. Information can be found at www.nyse.com. The NYSE is sometimes referred to as the “big board”.
This refers to the amount of dividends paid to shareholders divided by cash available for distribution, or AFFO. It reflects a company’s ability to cover its dividend payments.
Refers to securities which have no stated maturity date. These securities will remain outstanding until redeemed or called according to the provisions under which the security was issued, usually at the discretion of the corporate issuer.
A type of stock that 1) pays a fixed dividend and has priority over common stock in the payment of dividends and, 2) is senior to common stock in the case of a company’s liquidation. Generally, preferred shares carry no voting rights and are more similar to bonds than to common stock.
A qualified dividend is a common or preferred stock that qualifies for lower tax rates than ordinary dividends. The maximum tax rate of non-corporate taxpayers for “qualified dividend income” is generally 20%. In general, dividends payable by REITs are not eligible for the reduced tax rate on qualified dividend income.
Earnings not paid out as dividends that are retained by a company and reinvested in the company’s business.
Stands for “real estate investment trust”. This is a federally approved tax structure for public companies that own real estate, which requires a REIT to pay out at least 90% of its taxable income as dividends to shareholders. As long as the company pays out 90% of its taxable income, it does not pay federal income taxes. (See nareit.com for additional information about real estate investment trusts)
When a company declares a dividend, it sets a “record date” which is the date you must be a registered owner in order to receive the declared dividend.
This means that a security may be redeemed or called under provisions specified in the prospectus (offering document). If an investment is called, an investor will receive the redemption price, which is typically the original offering price, on the redemption date.
This is the price of the security that the issuer must pay to the investor when it is redeemed. This price is set forth in the offering document (Prospectus).
SEC and EDGAR:
“SEC” stands for “United States Securities and Exchange Commission.” The primary mission of the SEC is to protect investors and maintain the integrity of the securities markets. “EDGAR” stands for Electronic Data Gathering, Analysis and Retrieval, and is an electronic collection of information sent by publicly traded companies to the SEC. In 1933, the SEC was created to serve as a watchdog group for investors. EDGAR is a source of information on public companies.
A ticker symbol is a series of one to five letters used to identify the security of a company.
A stock’s dividend income plus share price appreciation, before taxes.
Yield refers to the cash rate of return an investor may receive on an investment.
Yield on Cost:
This is the yield based on the current annual dividend amount calculated as a percentage of the original purchase price of the underlying shares. Some investors consider yield on cost to be a good gauge of long-term performance of a dividend-paying stock.