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.

RELATED TERMS
  1. Convertible Security

    An investment that can be changed into another form. The most ...
  2. Market Conversion Price

    An investor's effective cost to purchase common stock when it ...
  3. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
  4. Conversion Value

    The financial worth of the securities obtained by exchanging ...
  5. Deferred Equity

    A type of security, such as preferred shares or convertible bonds, ...
  6. Conversion Parity Price

    The price paid for a share of stock purchased by exercising the ...
Related Articles
  1. Bonds & Fixed Income

    Convertible Bonds: Pros And Cons For Companies And Investors

    Find out why businesses choose this type of financing and what effect this has on investors.
  2. Options & Futures

    20 Investments: Convertible Security

    What Is It? A convertible, sometimes called a CV, is either a convertible bond or a preferred stock convertible. A convertible bond is a bond that can be converted into the company's common stock. ...
  3. Mutual Funds & ETFs

    3 Best High-Yielding Convertible Bond Mutual Funds (LACFX, FACVX)

    Discover an often overlooked asset class and how your portfolio can benefit from it, and learn about three of the highest-yielding options available.
  4. Investing Basics

    What is Convertible Preferred Stock?

    Convertible preferred stock is preferred stock that can be converted into common stock as of a predetermined date at a specified ratio.
  5. Financial Advisors

    Worried About Stocks? Try on Convertibles

    Convertibles are a good hedge against equity market risk (if you're o.k. with losing a bit of upside potential).
  6. Professionals

    Shares from Conversion

    Series 7 - Equities Section 3: Shares from Conversion
  7. Options & Futures

    The Mandatory Convertible: A "Must Have" For Your Portfolio?

    Mandatory convertibles are a little understood security with some distinct advantages. Find out if they are right for you.
  8. Bonds & Fixed Income

    Convertible Bonds: An Introduction

    Find out about the nuts and bolts, pros and cons of investing in bonds.
  9. Mutual Funds & ETFs

    3 Best High-Yielding Convertible Bond ETFs (CWB, ICVT)

    Discover how convertible bond ETFs can offer investors growth and income while hedging fixed income portfolios in a rising rate environment.
  10. Investing

    What You Should Know About Convertible Bonds

    As investors continue to seek yield in the current market, it's now a good time to bring up an often overlooked asset class—the convertible bond.
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. 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 >>
  3. 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 >>
  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 >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center