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.

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RELATED FAQS
  1. What is the difference between convertible and reverse convertible bonds?

    The difference between a regular convertible bond and a reverse convertible bond is the options attached to the bond. While ... Read Answer >>
  2. What is a 'busted' convertible bond?

    Learn about busted convertible bonds; these are hybrid securities with conversion prices significantly higher than the market ... Read Answer >>
  3. Where does the stock come from when convertible bonds are converted to stock?

    First, let's define convertible bonds. A unique combination of debt and equity, they provide investors with the chance to ... Read Answer >>
  4. Why would a corporation issue convertible bonds?

    Discover how corporations issue convertible bonds to take advantage of much lower interest rates as a result of a conversion ... Read Answer >>
  5. Do convertible bonds have voting rights?

    Convertible bonds usually have no voting rights until they are converted. Even after conversion, they may not be granted ... Read Answer >>
  6. What is a Chinese hedge?

    A Chinese Hedge is a form of arbitrage by which an investor shorts a convertible bond and buys the underlying common stock. ... Read Answer >>
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