Watered Stock

AAA

DEFINITION of 'Watered Stock'

Stock that is issued with a value much greater than the value of the issuing company's assets. Watered stock can be caused by excessive stock dividends, overvalued assets and/or large operating losses.

INVESTOPEDIA EXPLAINS 'Watered Stock'

Assets can be overvalued for several reasons, including inflated accounting values or excessive issue of stock (through a dividend or employee stock-option program). This term is thought to originate from ranchers who would feed their cattle large amounts of water before market day to make them heavier, fetching a price higher than their worth.

RELATED TERMS
  1. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
  2. Overvalued

    A stock with a current price that is not justified by its earnings ...
  3. Diluted Earnings Per Share - Diluted ...

    A performance metric used to gauge the quality of a company's ...
  4. Stock Dividend

    A dividend payment made in the form of additional shares, rather ...
  5. Value Investing

    The strategy of selecting stocks that trade for less than their ...
  6. Value Stock

    A stock that tends to trade at a lower price relative to it's ...
Related Articles
  1. Tales From Wall Street's Crypt
    Bonds & Fixed Income

    Tales From Wall Street's Crypt

  2. What Are Corporate Actions?
    Bonds & Fixed Income

    What Are Corporate Actions?

  3. How To Invest In The Nikkei 225
    Mutual Funds & ETFs

    How To Invest In The Nikkei 225

  4. A Guide To Japan’s Nikkei 225 Index
    Investing Basics

    A Guide To Japan’s Nikkei 225 Index

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center