Stocks, Equities or Shares
Portlingtion Financial Group through our partnership with National Bank and Discount Brokerage firms, we can buy or sell any stock or exchange traded fund available in North America. Our independence enables us to review research from several sources such as the National Bank to identify stocks that meet your finanicial objectives.
What are Stocks?
Stocks are pieces of a company. When you buy stocks or shares of a company, you're basically purchasing an ownership interest in that company. A company's stockholders or shareholders all have equity in the company, or own a fractional portion of the whole company. They buy the stocks because they expect to profit when the company profits. Companies issue two basic types of stock: common and preferred shares.
Common Shares
Both public and private corporations can issue common shares. Common shareholders are the owners of a company and initially provide the equity capital to start the business.
Common share ownership in a public company offers many benefits to investors. The following are some of its main advantages:
- capital appreciation
- dividends
- voting privileges
- marketability - shares can easily be bought or sold
- dividend tax credit and capital gains tax
There are also a few drawbacks to owning common shares. Although part owner of the business, common shareholders are in a relatively weak position, as senior creditors, bond holders, and preferred shareholders all have prior claims on the earnings and assets of a company. While interest payments are guaranteed to bond holders, dividends are payable to shareholders at the discretion of the directors of a company.
Preferred Shares
Preferred stock is a class of share capital that generally entitles shareholders to fixed dividends ahead of the company's common shares and to a stated dollar value per share in the event of liquidation. Typically, the preferred shareholder occupies a position between that of a company's creditors and its common shareholders. If a company's ability to pay interest and dividends suffers due to poor earnings, the preferred shareholder is better protected than common shareholders but worse off than creditors.
There are many different variations of preferred shares, including convertible preferreds, retractable preferreds, and variable-rate preferreds. Most Canadian preferreds are cumulative: when dividends are withheld, they accumulate in what is known as arrears. All arrears of cumulative preferred dividends must be paid before any common dividends can be distributed.
As preferred shares have characteristics of both debt and equity, they provide a link between the bond and common equity sections of a portfolio. Because there is such a wide variety of preferreds available, they are suitable investments for most investment portfolios.
One shortcoming of preferred shares is that many are non-voting. However, after a specified number of preferred dividends are withheld, voting rights are usually assigned to preferred shareholders.
To learn more about stocks and the other financial instruments please review this excellent document
Understanding Capital Markets by CFIE . Please do not hesitate to contact us should yo have any questions.
