Stock bond dividends. Bond analysis. Beta. Who to be - co-owner or creditor

Of all the existing variety of different ways to invest your savings, no one could advise you on just one.

The best for all occasions, suitable for everyone.

The choice has to be made after careful study of the nuances and depending on your goals, capabilities and even, oddly enough, on personal psychological inclinations.

So, read the article: the difference between a bond and a stock. It would seem that both of them are securities, by purchasing which we invest in the issuing company.

But upon closer examination, there are more fundamental differences than commonalities. So think about it: do you like to take risks in order to hit the “big jackpot” on stocks, or would you prefer to “cut coupons” on bonds in a measured and calm manner.

Concept of stocks and bonds

Stocks and bonds are very popular instruments for investing in the stock market, but they differ significantly from each other.

Promotion.

A share is a security that gives its holder the right to participate in the management of a joint-stock company, to receive part of the profit in the form of dividends, as well as part of the property that remains after its liquidation.

A joint stock company (JSC) issues its shares upon its creation, upon transformation of an enterprise into a joint-stock company, upon the merger or acquisition of two or more joint-stock companies, as well as to release funds when the authorized capital increases.

In general terms, a share implies a share in a company. And the more shares the owner of a company has in his hands, the larger part of this company he can own.

There are ordinary and preferred shares:

Ordinary shares include those shares for which the income received will depend on the amount of net income of the company and its dividend policy.
Preferred shares are shares that entitle their holder (owner) to receive dividends on them, first of all, at a fixed rate, independent of the level of profit that the joint-stock company receives in a given period.

But the owners of such shares cannot participate in various decisions and influence the activities of the company. Investors typically make the most money when they own a stock from its dividends. The income received from dividends is sometimes equal to the income from bank deposits.

However, investing in stocks is riskier than investing in bank deposits. Because you may not receive dividends at all on shares, unlike deposits, for which a fixed income is always established.

The investor makes a profit from the shares through the difference in their price and its change. But what should be taken into account here is that

Bond.

A bond is a security that gives its owner the right to receive, upon expiration of a specified period, from the issuer of the bond its nominal value along with a fixed income in the form of a percentage of this value.

In general terms, a bond implies a kind of loan, that is, by investing in bonds, the investor lends his money to the company, and it, in turn, undertakes to pay the reward after the loan expires.

There are coupon, registered, secured and unsecured bonds:

A coupon bond is a bearer bond. Special coupons are applied to such a bond, on which interest income is paid upon expiration of the specified period.
A registered bond is a bond that is registered in the name of its holder, who is assigned a registered certificate.
Secured bonds are bonds that are actually backed by assets in the form of collateral, securities, and equipment.
Unsecured bonds are bonds that do not have any material backing, they are simply backed by the good faith of the company.

What is the difference

So, the main difference between stocks and bonds is that:

A stock is an equity security and a bond is a debt security.
Also, the price of a share is constantly changing under the influence of various factors (political, economic, social, etc.), in contrast to the price of bonds, which remains unchanged.

Source: "bsu-az.org"

The difference between a bond and a stock - the mechanism of action

There are several types of investing, and it is impossible to say which one is better. We will tell you about the most popular ones, after which you, guided by your own preferences, can draw your own conclusions.

Both bonds and shares are classified as securities market instruments. For enterprises, they are an effective means of replenishing capital.

Investors need them to make a profit. However, stocks and bonds have different mechanisms of action:

By purchasing a share, an investor receives a share in the assets and can claim a portion of the company's profits.
By purchasing a bond, the investor becomes a creditor of the enterprise.

How shares work

A share is a security issued by an enterprise that is a joint-stock company or reorganized into a joint-stock company. Shares of different companies have different values. It may change over time. By purchasing a certain number of shares, the investor makes a contribution to the authorized capital of the company, the value of which is equal to the total value of these securities.

The owner of shares has the right to receive income or dividends, the source of which is the retained earnings of the joint-stock company. Thus, the sale of shares is the transfer of a share of the company’s property into the hands of the investor. There are ordinary and preferred shares.

By purchasing shares of any enterprise, an investor takes a conscious risk. The value of shares is determined by the value of the enterprise and can decrease or increase depending on its position in the market. The market's assessment of an enterprise often turns out to be unfounded.

How bonds work

Like a stock, a bond is a security the issue of which is initiated by a company in order to improve its financial position. Facing a shortage of funds, it issues bonds and offers them to both individuals and legal entities.

The bond has a specific duration. The holder of a bond acquires the right to receive income (fixed interest) from it. Upon expiration of the security, the issuer returns its face value to the holder.

A bond is a debt security. Purchasing and holding bonds is a type of lending. The income received by the holder is fixed.

As for risks, in this regard bonds are preferable to shares, since their volatility is low. But this does not mean that the investor does not risk anything at all: there is always the possibility that the company will not be able to pay its creditors.

Differences

These types of securities should be compared according to several parameters:

Participation in the management of the issuing company.

Shareholders theoretically have the opportunity to influence the policy of the joint-stock company, since they are members of the board of shareholders and have voting rights. Bond owners do not participate in the fate of the company, but simply provide it with a loan for a certain period.

Security holder status.

A shareholder is a co-owner of the company, while a bondholder is a creditor.

Profitability.

Dividends from stocks always exceed interest from bonds. Sometimes these values are incommensurable.

Risks.

When a company goes bankrupt, it first pays off its bondholders. Shareholders have a chance of getting nothing at all. However, both bonds and shares are considered risky.

Let's summarize:

Shares can quickly make an investor rich, or they can sharply depreciate and leave him with nothing.
Bonds are more reliable. Their income is stable, but small.
Often, novice investors prefer bonds.
Stocks are a tool for advanced players.

Source: "temabiz.com"

Who to be - co-owner or creditor

Despite the fact that both stocks and bonds are securities, the differences between a STOCK and a BOND are fundamental.

A share is a security that certifies the share of ownership of its owner (shareholder) in the company and gives the shareholder the right to participate in the management of the company and/or to receive dividends.

The bond fixes the company's debt obligations to the bondholder and has no relation to the share in the company and to the distribution of profits and management of the company.

Accordingly, based on the nature of these securities, their owners have different rights and opportunities regarding the income provided by these instruments, its size, frequency and order of payment, as well as guarantees of income and risks, as well as the possibility of influencing the company’s activities:

shareholders - co-owners of the company,
bondholders are creditors.

Payments on securities

Security holders periodically receive payments stipulated directly by each security (issue documents):

Shareholders receive dividends determined by the decision of the general meeting.

There are no other periodic payments on shares. On liquidation of a company, the shareholder is paid a portion of the funds, if any, after the claims of all creditors have been satisfied.

Bondholders are paid interest income at intervals specified in the document regulating the issue of bonds (decision on issue or prospectus) and at the end of the bond's circulation period, upon redemption, the par value is paid. There are no additional payments on bonds.

Regularity

The timing and frequency of payments for shares and bonds differ and are determined for each security separately:

Dividends on shares are usually paid once a year. Some companies pay dividends quarterly. The timing of dividend payments is established separately by each decision on the distribution of enterprise profits to shareholders.
Payments to bondholders occur regularly on a periodic basis - once a month, quarterly, half-yearly, yearly. The frequency of payments remains unchanged during the circulation period of the bond issue.

Payment amount

The amount of paid earnings per share is determined annually by the general meeting of shareholders, depends on the financial performance of the company and may vary significantly from year to year. If the financial result is unsatisfactory, dividends may not be paid, that is, the return on the investment for the period may be zero.

Interest income paid to bondholders is regulated by the issue documents. They clearly state the yield and the procedure for changing it, if such a change is provided for by the issue of bonds.

Cost of the Central Bank

Both shares and bonds have a par value established by the issue documents at the time of issue. In an initial offering, securities are usually bought and sold at par. During the circulation of securities on the secondary market, their value may differ significantly from their nominal value.

The price of a share on the market depends on the financial performance of the issuer, the level of dividends paid per share and expectations of the issuer's future financial results. The better the financial performance and expectations, the higher the share price. The value of shares, depending on the results of operations, can either increase or decrease.
The price of a bond is directly related to its nominal value provided for payment at maturity, the nominal yield of the issue, maturity, and also significantly depends on the general interest rate in the economy.

When the cost of funds in the economy increases, the price of bonds, regardless of the financial results of the issuer, decreases, and when it decreases, on the contrary, it increases.

That is, it is inversely related. A change in market price may be significant, but does not affect the nominal yield and payout at maturity.

Guarantees and risks

Like all investments, investments in securities carry risks for the investor:

Shares are a riskier financial instrument. Shareholders are not guaranteed a return on their investment or any payment per share.
Bonds are secured by the property and assets of the issuing company, or other collateral, and guarantee the payment of par and regular interest payments.

In the event of liquidation of the issuing company during the division of property, shareholders can only rely on that part of the property that will remain after the payment of all debts, including bonds.

Application deadlines

A share is a perpetual security, that is, it exists until the liquidation of the joint-stock company.
Bonds are issued for a period determined by the issue documents.

As a result, when making an investment decision regarding an investment instrument, all the pros and cons of stocks and bonds are weighed in relation to the individual situation of each investor. There is no single “right” solution, and many individual factors must be taken into account. After determining the type of investment instrument, you need to make a choice among the many securities available on the market.

Source: "avangard.by"

Fundamental differences

There are several fundamental differences between bonds and stocks:

First, by their nature, bonds carry far less risk than stocks.

This is due to the fact that the flow of payments for bonds is known in advance: the time of payments and their size are clearly recorded.

Thus, the investor is guaranteed a fixed income, as well as a return of funds within a certain period.

Secondly, an investor, when purchasing bonds, does not take on the business risks of the issuing company, with the exception of catastrophic ones that could lead to bankruptcy (but this happens relatively rarely).

It is also worth noting that payments on bonds are not related to the amount of profit of the issuer, prospects for the development of the industry and the economy as a whole. Each company, regardless of the results of its activities, is obliged to fully make payments on the bonds it has issued. Simply put, you should be paid back everything you invested, “come rain or shine.”

But shareholders cannot always count on receiving dividends. Well, if dividends are not paid on some specific shares, then their price, as a rule, will tend to go down, which can bring even greater losses.

Third, investors can expect to receive additional income from rising market prices for bonds.

If market prices “stretch” upward, then the investor has the opportunity to sell securities and receive additional income. In the event of a negative price trend, you can not worry at all and calmly wait for the redemption of this bond issue. One way or another, the investor will receive the planned income.

Thus, bonds are an ideal choice for investors who want to earn income without taking risks. The bond market is a kind of “safe haven” where you can not only save your money from inflation, but also receive significant income.

For those investors who do not want to wait for the maturity date of bonds, bonds with the possibility of regular early repayment are suitable. Their owner knows in advance about the time “window” during which he can, if desired, sell the bonds. The issuing company also announces the repurchase price in advance (makes an offer).

Source: "helpinvest.ru"

Which investment is better?

Stocks and bonds are the most popular securities on the stock market, but they differ significantly from each other. To put it very simply and briefly, bonds are more reliable, but bring less profit to the investor.

Main differences:

Shares are issued only by corporations. Bonds are issued by both corporations and government institutions.
Investors may receive dividends from shares, but they are not guaranteed. With bonds, the investor receives interest that is guaranteed unless the company or government goes bankrupt.
In the event of bankruptcy, bonds are a safer instrument than stocks.
By purchasing shares, you become a co-owner of the company. By purchasing bonds, you become a lender, that is, you lend money at interest.

Buy part of the debt or part of the business

When you buy a stock, you're buying a small part of a company (or a big part if you're Warren Buffett and have plenty of money). That is, you become a co-owner of the business. As an owner you have certain privileges:

For example, you have the right to vote when making major decisions and choosing the composition of the board of directors (usually, one share is one vote).
But something else is even more important. As a shareholder, you are entitled to a proportionate share of the company's profits when they are paid out in the form of dividends.

Companies can attract investment capital not only by issuing shares and thus selling part of the business. Another option is to borrow, that is, issue bonds. In other words, when you buy a bond, you are buying a portion of the company's debt, rather than a portion of the business as you would with a stock.

How do you earn

One of the main reasons why stock prices go up and down is because the company's earnings are constantly changing:

When a company earns large profits, its shares rise in price.
And vice versa, there is no income - prices fall. This means that if the company goes bankrupt, the shareholders lose their money.

When things get so bad that a company can no longer pay its debts, shareholders usually end up last in line for possible compensation. Of course, in most cases, they get nothing.

As a bondholder, you receive interest at regular intervals, regardless of how the company is doing (as long as it doesn't go bankrupt). That is, the bond owner practically does not care what happens to the company. Until she goes bankrupt, she must regularly pay interest on her debts (by law).

The downside, of course, is that if the company is doing just fine, this will not affect the amount of your deductions in any way, they will remain the same, you will not receive anything additional.

Bankruptcy

Another key difference between a stock and a bond is what happens in the event of bankruptcy:

As mentioned above, shareholders in this case usually stand at the very end of the queue for a refund.
Bondholders in this queue, as a rule, are first and receive back those funds that still remain in the company's assets.

Only after the money has been returned to creditors and bondholders will it be the shareholders' turn, unless, of course, there is anything left.

Types of shares

There are several different types of stocks and bonds that you can choose to invest in. They all have their own pros and cons.

All stocks fall under two main categories:

ordinary,
privileged.

The vast majority of investors buy common shares. A good, diversified investor's portfolio usually contains shares of different companies.

Stocks by market capitalization.

Companies are small, medium and large:

Small companies typically have capitalizations ranging from $300 million to $2 billion.
For medium-sized companies this is from 2 to 10 billion dollars.
Well, the third group includes all other companies whose capitalization exceeds $10 billion.

Large companies are the most stable compared to small ones. However, you need to understand that the higher the risk, the higher the potential profit. Small companies grow and develop faster, but are not always able to survive an economic crisis.

Promotions by sector.

Another thing an investor should think about before purchasing shares is what sector the company operates in. If you don't understand anything about information technology, then tech stocks may not be for you. But you need to remember that it is better not to invest all your money in one sector. Choose a few of those whose business you understand.

Growth stocks.

Some stocks are growing fast and have good potential, but they tend to pose more risk. Other stocks are growing more slowly, but more steadily. As mentioned above, this usually correlates with the size of the company.

Promotions by region.

Investors always have the choice to invest in companies in their own country or abroad. European and American stock exchanges are of particular interest to Russian investors. These exchanges always have an excellent selection of large, successful and stable companies. For those who are willing to take more risk for more income, it makes sense to look at the Asian markets.

Types of Bonds

Government bonds.

The owner of such bonds actually lends his money to the state at interest (For example, Russian federal loan bonds). This is a fairly reliable investment, since countries with stable economies always pay off their debts along with interest. In some countries, there are several subtypes of government bonds. They differ in cost and the amount of interest paid.

Corporate bonds.

These are, as the name suggests, bonds issued by corporations. That is, in this case, the investor lends money to a private company.

These are usually riskier than buying government bonds, but they also offer higher returns.

When selecting bonds for investment, investors can use data from various rating agencies (Standard & Poor’s, Fitch and others) to assess potential risks.

Pricing

Source: "biznes-praktik."

What to choose

Stocks or bonds? Every investor who wants to minimize risks in their investment portfolio chooses between bonds and stocks. What to choose - stocks or bonds? What to focus on?

First, let's talk about what bonds are.

A bond is a kind of agreement according to which the issuer (an organization that issued securities to develop and finance its activities) must return to the investor the amount of money borrowed from him.

Also, the issuer must pay a certain percentage over a certain period of time. A bond is essentially a document that confirms the existence of a debt that can be traded. In other words, this is a regular loan that a company takes from you at an agreed interest rate with confirmation of this on paper, only this happens automatically.

What is a share?

This is a security that confirms the rights of its owner to receive part of the profit from the company in the form of dividends. That is, the owner of the share is a partial owner of the company and has the right to participate in the management of the joint-stock company and to part of the property (which will remain after its liquidation). A share is usually a registered security.

Let's return to the question of what to choose - stocks or bonds? In this matter, we need to understand how bonds differ from stocks.

Perhaps the most important difference between bonds and stocks is that bonds have much less risk than stocks to which the investor is exposed.

When you buy bonds, you can be sure that you will already have a regular income from them. Since the company (issuer) is obliged to pay you the agreed percentage. Also, the price of the bond does not change, that is, by selling the bonds at the end of the term, you will receive a pre-agreed amount.

Another equally important advantage of bonds is the ability to plan your income for a certain period, since bonds have their own expiration date.

Bonds also have much lower risk than stocks. This is because when you buy bonds, you are not taking on the company's business risks.

When buying bonds, you are exposed to only one risk - the bankruptcy of the company, but the investor who buys the bonds is guaranteed to pay the full value of the bond in any case.

There are also situations with shares when the owners of shares (shareholders) do not receive dividends.

There is another equally important difference between bonds and stocks:

The price of bonds cannot decrease, it can only increase or remain the same.
In the case of shares, the price can either decrease or increase. The price of a stock often depends on market behavior, which is why stocks have higher risks than bonds.

Naturally, if an investor is lucky, shares can bring him a lot of money. And income from bonds will always be moderate. Moderate, but guaranteed. Therefore, people who like to take risks are better off buying stocks, but people who want to get a stable income without taking any risks are better off buying bonds. And the best thing is to combine.

Characteristics of types of dividends on bonds

There are the following types of coupon payments on bonds:

Fixed coupon payment, the amount of which is determined upon issue of the bond;
Payment with a variable coupon, the size of which may change in accordance with the criteria determined when the bond was issued;
Amortized payments involve repaying the principal of the debt in installments rather than in a lump sum.

The size of coupon dividends depends, first of all, on the degree of reliability of the issuing company. The higher the company’s rating, the more financially stable it is, the greater the trust in it will be and, accordingly, the greater the percentage of payments.

In general, bond yields depend on the following factors:

changes in the price of the bond - the investor can receive additional income from the resale of the security;
the amount of coupon income;
the possibility of reinvesting dividends received - often used when purchasing long-term bonds.

Possible types of income from bonds

Note 1

A bond is a debt security, by purchasing which the investor becomes a creditor of the enterprise that issued it.

The company issuing the bond acts as a borrower and assumes the following obligations:

pay income for the temporary use of the bondholder's funds;
repay a bond by repurchasing it at par when its maturity expires.

Any investor wants to make effective investments. Studying the profitability helps to understand whether a given investment or acquisition will bring an effect.

There are the following types of bond yields:

Current yield is the amount of funds that an investor will receive in the current period (year).

The current yield is calculated as an indicator of the ratio of the amount of annual or current dividends on a bond to the costs of its acquisition (bond price). The size of the current yield on a bond is its simplest characteristic, since it is difficult to estimate the change in the price of the bond over the entire period that the investor has it. Thus, if the coupon yield is zero, then the current yield will also be zero.

The total return (final) is the amount of funds that the investor will receive over the entire period of holding the bond.

Total return is defined as the sum of the annual return for the entire period. In addition, when calculating it, you can take into account the difference between the purchase price of the bond and its sale. If a bond was purchased at a price lower than its face value, then upon redemption the investor receives additional income.

Factors that may affect bond yields:

possible risk of insolvency of the issuing enterprise - the higher the risk of failure by the issuing enterprise to fulfill its debt obligations, the greater the investor's profitability should be, because includes risk fee;
maturity of the bond - the longer the maturity of the bond, the higher the yield;
risk of decreased liquidity - any enterprise may have problems with liquidity, both short-term and long-term, therefore, the higher such risk, the higher the premium for it in the level of profitability;
inflation expectations – may lead to a decrease in bond yields.

– one of the most popular securities on world stock exchanges. Stocks and bonds can bring significant benefits to their owners and the companies that issue them.

Let's find out why these securities attract investors, what their essence is and what types exist.

Let's look at the main types of stocks and bonds

Shares: concept, benefits for the issuer and investor

The share certifies the right of the shareholder who purchased this security to membership in the joint-stock company. With the purchase of shares, the investor not only expects a certain income, but also calculates his benefit from participating in the life of the joint-stock company.

On the other hand, the issuer also benefits, since the issue provides a number of significant benefits.

For the issuer, the advantage of the issue is:

The opportunity to expand your authorized capital by attracting funds from individuals. Thus, citizens' savings are transformed into company assets that can generate income;
Independent determination of the amount of dividends. Companies have the right to decide whether to pay dividends or not, as well as determine the amount of dividends independently;
The organization that issued the shares is exempt from compensation for losses on ordinary shares in the event of bankruptcy and liquidation.

When purchasing shares, an investor has the right to count on:

Direct participation in the life of the joint-stock company. Sometimes this is the moment that attracts investors the most, since it becomes possible to take part in voting and cast their vote in favor of certain decisions;
Profit from the successful resale of securities in the event of an increase in their value on the stock market;
For certain benefits, in particular, discounts or bonuses from a joint stock company;
In case of liquidation of a company, for a certain share of the company’s property, or its equivalent value, which is formed after final settlements with creditors.

There are two main types of shares: common (the most common) and preferred. Common shares dominate the stock exchanges, since most corporations issue common shares in overwhelming quantities. This type of securities provides shareholders with ordinary rights and additional privileges are excluded.

Ordinary shares allow you to:

Have a voice in decision-making at meetings;
Easily and quickly purchase shares and get rid of them at the right time;
Increase your income by increasing the market price of the stock;

Dividends also remain an important factor. Apart from the expected benefits, common shares are not protected from financial risk. In the event of bankruptcy of the issuing company, shareholders with common shares do not have to lay claim to the property of the enterprise. The first on the list of applicants will be creditors and holders of preferred shares.

When we talk about preferred stock, we mean a security with a certain preference. Privileges include a fixed amount of dividends and/or the liquidation value of the property. The amount of dividends on such shares is expressed in value or percentage terms.

Persons holding preferred shares have limited rights at meetings. In particular, they do not take part in voting if changes to the charter, liquidation, or reorganization of the company are on the agenda.

Quote about stocks and bonds:

I never buy anything unless I can write down my explanations and reasons on one piece of paper. I may be wrong, but I will know the answer to this. “I'm paying $32 billion for the Coca-Cola Company because...” And if you can't answer that question, you shouldn't buy these . But if you answer this question and do it several times, you will make a lot of money.

© Warren Buffett

Work is an important part of every person's life. We all work in order to realize ourselves, reveal our own potential, achieve recognition and, trivially, but importantly, get money.

The level of earnings determines the quality of our life. Therefore, we always strive to find a way to earn as much as possible, but at the same time we want to spend as little time on it as possible. This option could be to receive passive income from owning securities that can bring money to an ordinary person.

What are dividends? “Dividend” is the amount of money that people who invest their money in a company receive. Or, from the reverse position, it is the part of the profit that the organization pays to shareholders.

It is important that depending on which securities you hold, you can receive different income. Their rates, terms and conditions of payments, and risks change. Let's find out in more detail what dividends are and what grounds exist for their payment.

How are returns on shares generated?

During a certain period of time, any company operates and makes some profit. At the end of the reporting period: quarter, six months or year, the meeting of shareholders decides whether to allocate funds and in what volume to transfer them to shareholders.

In what cases can the meeting of shareholders decide to withhold capital? This usually happens when a company needs money for development or to create a financial cushion in anticipation of a crisis.

What are stock dividends? This is the profit that shareholders receive from the company's earnings. It is important that you can get it even if you have been the owner of the shares for only a couple of days. The main thing is that the final register be compiled for this period.

Dividends are distinguished by types of shares, which are:

Privileged;
Ordinary.

Ordinary - confirm that their holder is a member of the joint-stock company and give him the right to vote, as well as the right to receive a share of the profits. Their owners can also claim part of the company's property upon its liquidation.

Preferred shares give holders priority rights to receive dividends, but do not provide voting rights at meetings.

A division also exists according to the frequency with which payments are made:

Annual;
Semi-annual;
Quarterly.

The frequency is set at a meeting of shareholders and may change. Thus, based on the results of the first quarter, members of the meeting may decide in favor of making payments, and already at the second meeting make a negative decision on this issue. The reasons for this may be different:

The need to channel money into development;
Creation of an anti-crisis cushion;
A period of turbulence in the economy.

According to the method of fulfillment of obligations, dividends can be monetary and property, and according to size: full or partial.

When deciding to buy shares to generate additional income, you should carefully study the market situation. The indicators of annual, semi-annual and quarterly dividend payments for the year and their relationship with the figures in the register for the previous year will help predict possible profitability.

As for more precise indicators, in 2015 the company M.Video showed the highest profitability. Len Gold shares have a high dividend yield, although only this year. Gazprom shares have stable returns, but not so high.

Yield from purchasing bonds

Bonds, like shares, are basic financial instruments, but unlike the latter, they do not give property rights regarding the issuer company. By purchasing a bond, you become not a co-owner of an organization or production, but its creditor. That is, the latter takes on the role of a debtor and is obliged:

Pay you money for using the money.
Buy the document from you at full price by the end of the circulation period.

Bonds do not pay dividends, but coupons, which, unlike dividend payments, are mandatory.

There are different types of bonds, with different repayment terms for the issuer. Depending on this, the success of your deposit changes.

With a fixed coupon - the size of the coupons is determined in advance when the bond is issued.
With a variable coupon – the size of coupons can vary depending on predetermined criteria.
Zero coupon – no coupons are paid, but the bond is issued at a significant discount.
Amortizing – The principal is paid in installments rather than being repaid at the end like regular bonds.

Let's look at what other types of bonds there are.

Income bonds are the most profitable and the riskiest. Their key difference is that they only pay out if the issuer makes a profit. They are usually issued by companies that already have debts that need to be covered.

Guaranteed securities are those in which interest payments to you are guaranteed by a third party. Usually this is a guarantee from a bank or any large company. The income here is usually small, but there are no risks. The only unpleasant scenario may develop if the bank’s license is revoked, but this issue can also be resolved. Bonds can also be secured, usually secured by property.

Savings bonds are distinguished by the peculiarity of making payments. Thus, dividends on them are accrued regularly and monthly without fail, but are not transferred to the creditor. The money accumulates and is paid out in a single payment upon completion of the document’s circulation period.

The situation with documents with a floating rate is not stable. When sold, they have a fixed monthly income for only 6 months. After this, the bet size is reviewed and can be either increased or decreased.

Junk bonds are considered to be the most profitable of all, but there is a certain nuance here. They come in 2 types:

Reliable from the start.
Initially high-risk.

The first type is usually characterized as bonds that guarantee high returns. The second type: risky securities at the time of sale, which are usually issued for large leveraged transactions. For example, during a merger or buyout of a controlling stake. It is almost impossible to predict whether they will be profitable at the time of issue.

So, speaking of what bond dividends are, they are funds that the lender receives under certain conditions.

However, you can only live on passive income in the form of dividends and coupons from securities if you are the owner of a huge portfolio, like Warren Buffett. Therefore, the selection of stocks and bonds and their purchase should be approached with all responsibility.

Buy shares online

We have a wonderful partner - this is the Finam brokerage company, you can open a brokerage account there online or offline and after a while buy shares yourself in the terminal or by phone.

Recently, the Finam company developed an innovative service that allows you to buy shares in a couple of clicks. You can do this right now by clicking on the button below “Buy shares online”. Company employees will contact you and help you complete all the paperwork. You will become a real owner of shares quickly and without hassle. The shares can be any: Apple, Gazprom, Sberbank. The choice is large.

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Procedure for paying dividends on shares and interest on bonds

Topic 6. Calculation of the cost and profitability of securities

When investing in securities, an investor expects to receive income. The amount and methods of generating income for different securities vary significantly. The income paid on stocks is called a dividend; on bonds and other debt securities interest is paid.

Dividend–part of the net profit of a joint stock company subject to distribution among shareholders, per share. This profit is distributed among shareholders in proportion to the number and type of shares they own. The dividend is paid quarterly, semi-annually or annually. For preferred shares, upon issue, a fixed dividend (or its minimum amount) is established.

First of all, dividends are paid on preferred shares, then on common shares. If there is a profit sufficient to pay fixed dividends on preferred shares, the company does not have the right to refuse to pay them.

The payment of dividends on common shares is not a specific obligation of the company to shareholders. The General Meeting of Shareholders and the Board of Directors of the company have the right to make decisions on the inappropriateness of paying dividends on common shares based on the results of a particular period and the year as a whole. However, the payment of already declared dividends is mandatory for the company.

It is prohibited to declare and pay dividends if the company is insolvent or may become so after payment of dividends, as well as if there are losses on the balance sheet. Dividends are not paid on shares that have not been issued or are on the company's balance sheet. In case of partial payment for shares, dividends are paid in proportion to the paid part of the value of the shares, unless otherwise determined by the Charter of the company. Shares purchased no later than 30 days before the officially announced payment date are eligible for dividends.

By decision of the Board of Directors or the General Meeting of Shareholders, dividends can be paid in shares (capitalization of profits), bonds and goods. Dividends are taxed regardless of the form of payment in accordance with current tax legislation. In the case of payment of dividends in goods, the amount of the dividend calculated for tax purposes is determined based on the actual purchase prices of goods. The company announces the amount of dividends without taking into account taxes on them.

The dividend is paid by the company itself or the agent bank by check, payment order, postal or telegraphic transfer. The dividend is paid immediately, less applicable taxes. No interest is charged on unpaid dividends. The unclaimed dividend is transferred to the budget revenue of the corresponding constituent entity of the Russian Federation.

The procedure for paying interest on bonds. Interest on bonds is calculated in relation to the par value of the bonds, regardless of their market value. They can be paid quarterly, semi-annually or annually. Interest on bonds is paid to bondholders from the net profit of the company, and in case of insufficiency from the reserve fund formed by the company. If financial resources do not allow paying dividends on shares and interest on bonds at the same time, the bondholders have a priority right to receive them. If a company is declared insolvent, its property may be used to pay interest on bonds. If interest is not paid on time, the company may be declared insolvent. Bonds purchased no later than 30 days before their payment are entitled to receive interest on bonds, unless otherwise specified by the terms of the bond issue.

Interest on bonds issued as a primary placement in the first year is paid in proportion to the time the bond is actually in circulation, unless otherwise specified by the terms of issue. Interest on bonds may be paid in securities, goods or other property assets, if so provided for in the terms of the loan. Interest is paid directly by the legal entity that issued the loan, an agent bank or a financial intermediary acting on behalf of the client by check, money order, postal or telegraphic transfer. Interest paying entities act as tax collection agents for the government and pay interest to bondholders less applicable taxes. The payment of interest is noted by redeeming or cutting off the bond coupon. Unclaimed interest is transferred to the budget revenue of the corresponding constituent entity of the Russian Federation.