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.

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RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. What is the difference between yield and rate of return?

    Read about the differences between yield and rate of return. See why many novice investors often struggle more with the concept ... Read Answer >>
  5. What is dilutive stock?

    Dilutive stock is any security that dilutes the ownership percentage of current shareholders - that is, any security that ... Read Answer >>
  6. What are 'death spiral' convertible bonds?

    Conventional convertible bonds give the bondholder the right to exchange the bond for a certain amount of the issuer's common ... Read Answer >>
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