Yield Advantage


DEFINITION of 'Yield Advantage'

The relationship between convertible securities and the dividend yield of the common stock of the same issuing corporation. The yield advantage is the additional amount of return an investor can expect to earn if a convertible security is purchased instead of the common stock.

BREAKING DOWN 'Yield Advantage'

The yield advantage is calculated by subtracting the dividend yield of common stock from the rate of return on a convertible security. Determining this calculation helps investors decide if it is advantageous to retain the convertible security or exchange it for common stock.

  1. Yield

    The income return on an investment. This refers to the interest ...
  2. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
  3. Busted Convertible Security

    A convertible security that is trading well below its conversion ...
  4. Common Stock

    A security that represents ownership in a corporation. Holders ...
  5. Current Yield

    Annual income (interest or dividends) divided by the current ...
  6. Put-Call Parity

    A principle that defines the relationship between the price of ...
Related Articles
  1. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  2. Bonds & Fixed Income

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  3. Budgeting

    Your Worst Financial Mistakes And Why You Made Them

    No one intends to make a financial mistake, but an unexpected disaster or poor planning could leave you in financial distress.
  4. Stock Analysis

    Is Now the Right Time to Buy Brazilian Stocks?

    Examine the current state of the economy of Brazil, and learn why there may be some reasons for investors to look for a rally in Brazilian stocks.
  5. Bonds & Fixed Income

    An Assessment of High Yield Corporate Bond Credit Spreads

    A credit risk literature review.
  6. Investing Basics

    How to Think About Seasonality Trends

    Investors benefit when company research incorporates seasonality trends that predict relative strength and weakness throughout the calendar year.
  7. Personal Finance

    4 Ways Simple Interest Is Used In Real Life

    Simple interest works in your favor when you're a borrower, but against you when you're an investor.
  8. Investing

    Is it Time to “Buy” Inflation?

    Based on recent data from the Treasury-Inflation Protected Securities (TIPS) market, it would seem that most investors aren’t worried about inflation.
  9. Technical Indicators

    Explaining Autocorrelation

    Autocorrelation is the measure of an internal correlation with a given time series.
  10. Term

    Public Goods & Free Riders

    A public good is an item whose consumption is determined by society, not individual consumers.
  1. What is the difference between preferred stock and common stock?

    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's ... Read Full Answer >>
  2. Why do some preferred stocks have a higher yield than common stocks?

    Before we answer this question, let's just take a quick review of what a stock's yield is actually measuring. The yield is ... Read Full Answer >>
  3. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  4. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  5. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  6. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!