Compound interest is a process in which interest is credited to the existing principal as well as to the interest already paid.
Thus, compound interest can be interpreted as interest on interest, the effect of which is to increase the return on interest over time, the so-called “miracle of compound interest.”
When banks or financial institutions charge compound interest, they will use an interest period such as annual, monthly or daily.
Compound interest can occur on investments where savings grow faster, or on debt where the amount owed can increase even as payments are made.
Compounding naturally occurs in savings accounts; some dividend-paying investments may also benefit from compound interest.
Convertible preferred shares are a type of preferred shares that pay dividends and can be converted into ordinary shares at a fixed conversion rate after a certain period of time.
The dividend rate, expressed as a percentage or yield, is a financial ratio showing how much a company pays dividends annually in relation to its share price.
Dividend recapitalization is when a private equity firm issues new debt to raise money to pay special dividends to investors who helped finance the original purchase of the portfolio company.
Dividend yield, displayed as a percentage, is the amount of money a company pays shareholders for holding shares divided by the current price of its shares.
A Dividend Received Deduction (DRD) applies to certain corporations that receive dividends from related entities and mitigates potential triple taxation effects.
Forward dividend yield is the percentage of a company’s current share price that the company expects to pay out in dividends over a specified period of time, usually 12 months.