Glossary
The income investor’s vocabulary
Definitions for 154 terms used across YieldDesk: preferred stocks, baby bonds, BDCs, covered-call and preferred ETFs, rates, tax and the Income Quality Score. Find a term by name or abbreviation, or browse by category.
154 terms
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- 10-year Treasuryten-year, 10Y, 10-YRates
- The yield on the U.S. government's 10-year note, the reference rate for the income market. Market Trends measures the universe's median yield as a spread over it.
- See alsoYield spreadCurve spreads
A
- Accrued dividendaccrued interestYield and price
- The dividend or interest earned since the last ex-date and carried in the price. Preferreds and most baby bonds trade flat: the price rises as a payment approaches and drops by about the payment on the ex-date.
- See alsoStripped yieldEx-dividend date
- Read more in the Library
- After-tax incomeTax
- Annual income after the tax rates saved in Settings under Tax defaults. Qualified preferred dividends are taxed at the long-term capital gains rate plus state tax and, where it applies, the net investment income tax; baby bond interest and most BDC and covered-call distributions at ordinary rates plus the same. Shown on the Dashboard, Holdings, the Income Calendar, the Tax Center and each security's record.
- See alsoAfter-tax yield on costNet investment income taxQualified dividend income
- After-tax yield on costafter-tax YOCYield and price
- After-tax income divided by cost basis. The gap between yield on cost and after-tax yield on cost is the tax taken from the income.
- See alsoYield on costAfter-tax income
- All-in yieldYield and price
- For a BDC, regular and supplemental distributions declared over the past twelve months, divided by the price. It runs above the regular yield when a BDC has been paying supplementals.
- See alsoRegular dividend yieldSupplemental dividend
- Asset coveragecoverage floorStructure
- A fund's total assets, less liabilities other than its senior securities, divided by those senior securities. The Investment Company Act sets floors: 300% for a registered fund's debt, 200% for its preferred stock and 150% for most BDCs. Below its floor a fund cannot pay common distributions or buy back common shares until coverage is restored. The preferred score reads the cushion above the floor; see dividend coverage.
- See alsoFund-issued preferredLeverageDividend coverage
- Assets under managementAUMFunds
- The total assets a fund manages. Larger funds tend to trade with narrower spreads and to borrow at lower cost.
- See alsoExpense ratio
- Average daily volumeADVYield and price
- The average number of shares of an issue traded each day over the past 30 sessions. A measure of liquidity: lower volume means wider bid-ask spreads and slower exits.
- See alsoBid-ask spreadFloat
B
- Baby bondexchange-traded debt, ETD, exchange-traded noteStructure
- A corporate bond with a $25 par value that trades on a stock exchange rather than the over-the-counter bond market. It pays fixed interest, has a stated maturity and ranks ahead of preferred stock. Its payments are interest, taxed as ordinary income.
- See alsoPreferred stockYield to maturityCapital rank
- Read more in the Library
- Basis pointbp, bpsYield and price
- One hundredth of a percentage point. Yield spreads and rate moves are quoted in basis points; a move from 4.50% to 4.75% is 25 basis points.
- See alsoYield spread
- Bid-ask spreadspread (quote)Yield and price
- The gap between the highest price a buyer is bidding and the lowest price a seller is asking. A thinly traded preferred can carry a spread of several cents, a cost paid on the way in and again on the way out. Limit orders keep it in view.
- See alsoAverage daily volume
- Book IQSThe score
- For a preferred ETF, the weighted average score of the holdings YieldDesk can match to its records. It describes the book the fund holds and sits beside the fund's own score.
- See alsoPreferred ETFIncome Quality Score
- Breakeven SOFRRates
- For a fixed-to-floating issue, the SOFR level at which the floating coupon would equal the fixed coupon it replaces. Above it at the reset the coupon rises; below it, the coupon falls. Computed in the Fixed-to-Floating Yield and Variable-Rate Reset calculators. Not to be confused with inflation breakeven.
- See alsoFixed-to-floatingReset spreadInflation breakeven
- Business development companyBDCFunds
- A listed investment company that lends to private middle-market businesses. It must distribute at least 90% of its taxable income, and distribution yields commonly run 8 to 12%. Examples: ARCC, MAIN, OBDC.
- See alsoNet investment incomeLeverageRegular dividend yield
- Read more in the Library
- Buy-writeFunds
- An options strategy in which a fund holds a portfolio and sells covered calls against it. The premium collected funds the distributions; gains above the strike are given up.
- See alsoCovered-call ETFOverwrite percentageStrike distance
C
- Call dateStructure
- The first date on which an issuer can redeem a preferred or baby bond, usually at par. Issues tend to be called when refinancing costs less than the current coupon.
- See alsoCall windowYield to callCall protection
- Read more in the Library
- Call protectionbuyback economicsThe score
- The time left before an issue's call date. The score reads it with the price under the Buyback economics pillar: more years of protection score higher, non-callable issues receive full credit, and past the call date a deep discount scores well because a redemption would hand the holder a gain.
- See alsoCall datePillar
- Call windowStructure
- The period that begins on the call date, during which the issuer may redeem the issue at any time, usually at par and with notice. An alert can fire when a watched issue's call window opens.
- See alsoCall dateCallable
- Read more in the Library
- CallableStructure
- An issue the issuer may redeem on or after its call date. A non-callable issue has no call date. Most preferreds are both callable and perpetual; the two terms are independent.
- See alsoCall dateCall windowPerpetual
- Capital rankcapital structure, capital stack, seniorityStructure
- Where a security stands in line for repayment if the issuer fails: secured debt first, then senior notes, subordinated notes, preferred stock and, last, common stock. YieldDesk reads it from the security's name.
- See alsoSenior noteSubordinated notePreferred stock
- Read more in the Library
- Charactertax characterTax
- How a distribution is classified for tax: qualified dividend, ordinary dividend, capital gain or return of capital. A fund reports it on Form 1099-DIV after the year ends; the Tax Center splits each payment by it.
- See alsoQualified dividend incomeReturn of capitalForm 1099-DIV
- ConfidenceThe score
- The share of a security's score weight that could be scored from the data on file: high at 85% or more, medium from 60%, low below that. Missing measures are dropped and the remaining weights rescaled; when less than half the weight can be scored, a preferred's score is drawn toward the midpoint of 5.
- See alsoIncome Quality Score
- Convertible preferredStructure
- A preferred stock that can be exchanged for the issuer's common shares at a set ratio. It trades partly on its income and partly on the value of that right. Valued in the Convertible Value calculator.
- See alsoPreferred stock
- ConvexityYield and price
- The curve in an issue's price against rates. Duration alone understates gains and overstates losses on large rate moves; convexity is the correction. Used in the Rate Sensitivity calculator.
- See alsoDurationRate shock
- Cost basisbasisTax
- The total paid for a position, including fees, less any return of capital received. The denominator for yield on cost and for gains and losses.
- See alsoYield on costReturn of capitalUnrealized gain or loss
- CouponStructure
- The annual interest or dividend rate, stated as a percentage of par value. A 6.5% coupon on a $25 issue pays $1.625 a share each year.
- See alsoCoupon typePar value
- Coupon typeStructure
- How an issue's rate is set: fixed for life or until called, floating over a benchmark, fixed-to-floating, or a fixed-rate reset.
- See alsoFixed-to-floatingFloating rateFixed-rate reset
- Covered-call ETFCC ETF, covered call ETFFunds
- An exchange-traded fund that holds an equity portfolio and sells call options against it for income. Distribution rates commonly run 8 to 14%, and gains above the strike are given up. Examples: JEPI, JEPQ, QYLD, XYLD.
- See alsoBuy-writeOverwrite percentageTax ROC
- Credit qualitycreditThe score
- YieldDesk's classification of an issue's credit standing: Investment grade, High yield or Not rated, from the best rating on file. Letter grades are not displayed. An unrated issue leaves the score's credit measure unscored rather than assumed.
- See alsoInvestment gradePillar
- Read more in the Library
- CumulativeStructure
- A preferred structure in which skipped dividends accrue and must be paid in full before common shareholders receive anything.
- See alsoNon-cumulativeSuspension
- Current yieldYield and price
- Annual distribution divided by the current price: the headline figure on a quote screen. It says nothing about a call, a maturity or a price far from par; for that, see yield to worst. Computed in the Current Yield calculator.
- See alsoStripped yieldYield to worstTrailing twelve-month yield
- Read more in the Library
- Curve spreads2s10s, 5s30s, 3M/10Y, butterfly, fly, yield curveRates
- The gap between two Treasury yields, in basis points. 2s10s is the 10-year yield less the 2-year; 5s30s is the 30-year less the 5-year; the 3-month to 10-year spread is the 10-year less the 3-month bill. A negative figure means that part of the curve is inverted. The butterfly (2s5s30s) measures the bend in the middle: twice the 5-year less the 2-year and the 30-year.
- See also10-year TreasuryForward Rate Monitor
- CUSIPStructure
- The nine-character code that identifies a security in the U.S. clearing system. Two series from one issuer can share a ticker root but never a CUSIP.
- See alsoSeries
D
- Declaration dateStructure
- The date an issuer announces a coming dividend or distribution, with its amount, ex-date and pay date. An alert can fire when a watched issue declares; it arrives in the Inbox.
- See alsoEx-dividend datePay date
- Defined outcomebuffer ETFFunds
- A fund built from options to deliver a set range of returns over a set period, for example gains up to a cap with the first 10% of losses absorbed. The range holds only for an investor who buys on the first day of the period and holds to its end.
- See alsoPut writing
- Discountbelow par, to par, vs parYield and price
- A market price below par value, often quoted as a percentage: "trades at a 3.2% discount to par." Tables show price against par, where a discount is a negative figure.
- See alsoPremiumPar valueDiscount pool
- Read more in the Library
- Discount poolYield and price
- The number of securities with an Income Quality Score of 7 or higher that trade below par, or below net asset value for a BDC or a preferred ETF. The Sunday digest reports it each week as a measure of breadth: a wide pool means quality is cheap, a narrow one means it is not.
- See alsoDiscountIncome Quality ScoreSunday digest
- DistributionStructure
- A general term for any payment a fund or BDC makes to shareholders. Kept apart from "dividend" because the payment may include return of capital or option premium, not only earnings.
- See alsoReturn of capitalTax ROC
- Distribution RunwayrunwayFunds
- The years a fund's NAV could keep funding a payment fixed in dollars at the trailing pace. A fixed payment takes a larger share of NAV as NAV falls, so the decline speeds up. Sponsors usually cut a fixed payment long before NAV runs out; the runway describes the pressure toward that cut, not a date.
- See alsoYield SustainabilityNAV Half-LifePayout policy
- Dividend coveragecoverageThe score
- How well an issuer can pay its preferred dividend: the heaviest pillar in the preferred score. Operating companies are scored on earnings coverage in bands at 5, 3, 2 and 1 times. Funds and BDCs are scored on asset coverage against their legal floors, with the cushion above the floor once a ratio is on file. Banks and insurers are scored on the length of their unbroken payment record.
- See alsoAsset coveragePillarIncome at risk
- Dividend reinvestmentDRIPUsing YieldDesk
- Reinvesting distributions in more shares of the paying security rather than taking cash. On YieldDesk, DRIP mode is switched on in Settings to mark holdings as reinvesting; the DRIP Backtest and DRIP Projection calculators show the compounding.
- See alsoWatchlist
- Dot plotRates
- The Federal Reserve's chart of where each policymaker expects the federal funds rate to stand at the end of each coming year, published with the Summary of Economic Projections. The median dot is the figure most quoted.
- See alsoSummary of Economic ProjectionsFOMCForward Rate Monitor
- DurationYield and price
- The approximate percentage change in price for a one-point move in rates. Perpetual preferreds carry long duration; a one-point rise in rates can take 10% or more off the price.
- See alsoConvexityRate shockPerpetual
E
- Effective yieldeff. yieldYield and price
- On the Floating Rate page, the coupon an issue pays today divided by its price. On the fixed leg it is the fixed coupon; after the reset it is the current floating coupon.
- See alsoFloating rateFixed leg
- Estimated paymentest.Using YieldDesk
- A payment date or amount marked est. is projected from the last declaration and the pay cycle. The issuer has not declared it. Shown on the Income Calendar, Holdings, the Tax Center and each security's record.
- See alsoDeclaration datePay cycle
- Ex-dividend dateex-dateStructure
- The first day an issue trades without the right to the next payment. To receive it, shares must be bought before the ex-date.
- See alsoDeclaration datePay dateAccrued dividend
- Expense rationet expense ratioFunds
- A fund's annual operating cost as a percentage of its assets, taken from returns automatically. Lower is better, other things equal.
- See alsoGross expense ratioSEC yield
F
- Fee and hurdle dragFunds
- The yield a BDC investor gives up to management and incentive fees. The Fee and Hurdle Drag calculator expresses the combined load as percentage points of return a year.
- See alsoManagement feeIncentive fee
- Filedpre-listing, awaiting listing, new issueUsing YieldDesk
- A new preferred or baby bond whose prospectus is on file with the SEC but which has not begun trading. New Issues marks it Filed and counts it as awaiting listing until the first trade.
- See alsoIssuer IQS
- Financing vehicleStructure
- An entity set up to issue securities for a parent company, such as a funding trust or a financing subsidiary. It files no reports of its own; the parent's filings are the ones to read.
- See alsoTrust preferredIssuer
- First lienStructure
- A loan secured by a first claim on the borrower's assets, paid before any other lender if the borrower fails. The largest part of most BDC portfolios.
- See alsoSenior securedBusiness development company
- Five-year average yield5Y avg yieldYield and price
- A BDC's average yield over the past five years. Set beside today's yield, it shows whether the shares yield more or less than usual for the name.
- See alsoRegular dividend yield
- Fixed legStructure
- The period before a fixed-to-floating issue's reset date, while it still pays its fixed coupon. The Floating Rate page can filter to issues still on their fixed leg.
- See alsoFixed-to-floatingReset date
- Fixed-rate resetfixed reset, five-year resetStructure
- A coupon that is fixed but is set again at intervals, usually every five years, at a benchmark such as the five-year Treasury yield plus a fixed spread. Unlike a floating coupon it stays level between resets.
- See alsoReset dateReset spreadCoupon type
- Fixed-to-floatingfix-to-float, fixed-to-floatStructure
- A coupon that is fixed until a reset date and then floats at a benchmark, usually SOFR, plus a spread. It limits the damage from rising rates once the reset has passed.
- See alsoReset dateReset spreadFixed leg
- FloatYield and price
- The number of shares available for trading: shares outstanding less restricted holdings. Used with volume to judge how easily a position can be built or sold.
- See alsoAverage daily volume
- Floating ratefloaterStructure
- A coupon that resets periodically to a benchmark rate plus a fixed spread, today almost always SOFR. The Floating Rate page tracks every floating-rate preferred and baby bond, fixed-to-floating issue and fixed-rate reset.
- See alsoSOFRReset spreadFloor
- Floorrate floorStructure
- The lowest coupon a floating-rate issue can pay however far its benchmark falls. An issue with a 4% floor keeps paying 4% even if SOFR drops to zero.
- See alsoFloating rate
- FOMCFederal Open Market CommitteeRates
- The Federal Open Market Committee, the Federal Reserve body that sets the federal funds rate. It meets eight times a year on a published schedule.
- See alsoDot plotSummary of Economic Projections
- Form 1099-DIV1099-DIV, 1099Tax
- The form a broker sends each year reporting dividends and distributions: ordinary dividends in box 1a, the qualified part in box 1b, capital gain distributions in box 2a, nondividend distributions (return of capital) in box 3 and Section 199A dividends in box 5. Baby bond interest is reported on Form 1099-INT instead.
- See alsoCharacterReturn of capitalSection 199A
- Forward Rate MonitorFRMRates
- YieldDesk's page for SOFR, the Treasury curve and the Federal Reserve's dot plot. It lists coming coupon resets on floating, fixed-to-floating and fixed-rate reset issues, each at the coupon today's benchmark would set with floors and caps applied, and estimates how prices would move with rates.
- See alsoSOFRReset dateDot plot
- Fund-issued preferredStructure
- Preferred stock or notes issued by a closed-end fund registered under the Investment Company Act. The fund must keep asset coverage of at least 200% on its preferred and 300% on its notes, a legal cushion operating companies do not carry.
- See alsoRegistered fundAsset coverage
G
- Gross expense ratiogross ERFunds
- A fund's expense ratio before any fee waiver by its sponsor. The net ratio, after the waiver, is what holders pay while the waiver lasts.
- See alsoExpense ratio
H
- Holding periodTax
- The test a dividend must pass to be taxed as qualified: the shares held more than 60 days in the 121-day window that begins 60 days before the ex-date. A longer test applies to preferred dividends that cover periods of more than a year. The Tax Center flags lots that fall short.
- See alsoQualified dividend incomeEx-dividend date
- Hurdle rateFunds
- The return a BDC must earn for shareholders before its manager collects an incentive fee. A 7% hurdle means the first 7% of income accrues free of the fee.
- See alsoIncentive fee
I
- Implied SOFRRates
- The level of SOFR that market rates imply for a future date. The Forward Rate Monitor shows it twelve months ahead.
- See alsoSOFRForward Rate Monitor
- InboxUsing YieldDesk
- Where fired alerts, redemption notices, research reports and the Sunday digest arrive in the app. The Alerts page holds the rules; the Inbox holds what they found.
- See alsoSunday digestTolerance band
- Incentive feeFunds
- The share of income above the hurdle rate, commonly 17.5% to 20%, paid to a BDC's external manager on top of the management fee.
- See alsoHurdle rateManagement feeFee and hurdle drag
- Income at riskUsing YieldDesk
- On Holdings, the share of a portfolio's annual income from issues whose reported coverage is below 1.0 times, with the dollar amount beside it.
- See alsoDividend coverageNet investment income
- Income CalendarReceived, Due, EstimatedUsing YieldDesk
- The month-by-month view of income from holdings or a watchlist. Each payment reads Received once paid, Due once declared and not yet paid, and Estimated when projected from the issue's pay cycle before a declaration.
- See alsoPay cycleDeclaration dateWatchlist
- Income Quality ScoreIQS, score, BDC ScoreThe score
- YieldDesk's 0 to 10 score for each security: a weighted blend of measures set for each asset class. Preferreds and baby bonds, BDCs, covered-call ETFs and preferred ETFs each have their own rule set. The score is in beta; it describes a security and is not advice. See the methodology.
- See alsoIQS bandPillarConfidence
- Inflation breakeven5Y breakeven, breakeven inflationRates
- A nominal Treasury yield less the real yield of the same maturity: the inflation rate the market expects over that term. Not to be confused with breakeven SOFR.
- See alsoReal yieldBreakeven SOFR
- Insider tradinginsider buying, Form 4Using YieldDesk
- Purchases and sales of an issuer's securities by its own officers and directors, disclosed on SEC Form 4. An alert can fire on either at a watched preferred issuer or BDC.
- See alsoInbox
- Investment gradehigh yield, not ratedThe score
- The upper band of credit ratings. Below it an issue is speculative grade, commonly called high yield. YieldDesk shows the classification, not the grade.
- See alsoCredit qualityInvestment-grade share
- Read more in the Library
- IQS bandHigh Quality, Good, Average, Watch, tierThe score
- The label attached to a score: High Quality at 8 and above, Good from 6.5, Average from 5 and Watch below 5. Pills and seals on screens group the same scale into three score states.
- See alsoIncome Quality ScoreScore state
- IssuerStructure
- The company that issued the security. Bank of America is the issuer of every preferred that trades under BAC.
- See alsoSeriesFinancing vehicle
- Issuer IQSThe score
- On New Issues, the median score of the issuer's scored securities on file, shown for a new offering that has no score of its own yet.
- See alsoFiledIncome Quality Score
L
- Leveragedebt to equityFunds
- For a BDC, debt divided by net assets. The legal limit for most BDCs is 2.0 times; most run between 1.0 and 1.25 times. Higher leverage magnifies both income and credit losses. The Leverage Headroom calculator measures the room left.
- See alsoAsset coverageBusiness development company
- Leveraged fundleveredFunds
- A fund with more than 100% exposure to its underlying, through borrowing or derivatives. Gains and losses are magnified, and returns over longer periods drift from a simple multiple of the index.
- See alsoCovered-call ETF
- Long-term capital gains rateLTCGTax
- The federal rate on gains from assets held more than a year: 0%, 15% or 20%, by income. Qualified dividend income is taxed at the same rate. Set in Settings under Tax defaults.
- See alsoQualified dividend incomeNet investment income tax
M
- Managed distributionFunds
- A policy under which a fund pays a set amount or rate on a set schedule, whatever it earns. A shortfall is paid from capital gains or return of capital.
- See alsoReturn of capitalTax ROC
- Management feeFunds
- The base fee a BDC's external manager charges on assets, typically 1% to 1.75% a year, collected whatever the results.
- See alsoIncentive feeFee and hurdle drag
- Marginmargin loanUsing YieldDesk
- Borrowing from a broker against a portfolio to buy more securities. The Margin Analyzer tests whether an issue's yield still clears the loan rate after tax.
- See alsoLeverage
- Maturity dateStructure
- For a baby bond, the date the principal is repaid at par. Most preferred stocks have no maturity and are perpetual.
- See alsoYield to maturityPerpetual
- Read more in the Library
N
- Net investment incomeNII, NII coverageFunds
- For a BDC, investment income less operating expenses. Coverage above 1.0 times means the distribution is paid from income rather than capital. The BDC score reads it over four quarters; the NII Coverage Cushion calculator tests how far it can fall.
- See alsoBusiness development companySpillover incomeIncome at risk
- Net investment income taxNIITTax
- The 3.8% federal tax on investment income above $200,000 of income for a single filer or $250,000 for a joint return. Included in YieldDesk's after-tax figures when it applies.
- See alsoAfter-tax income
- No regular dividendThe score
- The label a BDC receives in place of a score band when it pays no regular dividend, because the score's income measures have nothing to read.
- See alsoIQS bandRegular dividend yield
- Non-accrualFunds
- For a BDC, a loan that has stopped paying interest. The non-accrual rate, shown as a share of the portfolio at fair value or at cost as labelled, is a leading measure of credit quality.
- See alsoBusiness development companyPayment-in-kind income
- Non-cumulativeStructure
- A preferred structure in which skipped dividends do not accrue. The issuer can skip a payment and never make it up. Most bank preferreds are non-cumulative.
- See alsoCumulativeSuspension
O
- Ordinary dividendTax
- A dividend taxed at ordinary income rates rather than the lower qualified rate. It includes most REIT and BDC distributions and dividends that fail the holding period. Baby bond interest is taxed the same way, though it is interest rather than a dividend.
- See alsoQualified dividend incomeREIT preferredForm 1099-DIV
- Overwrite percentageFunds
- For a covered-call ETF, the share of the portfolio with calls written against it. At 100% the fund gives up nearly all gains above the strike.
- See alsoBuy-writeStrike distance
P
- Par valueparYield and price
- The face value of an issue, usually $25 for exchange-listed preferreds and baby bonds. Issues are called at par, and the coupon is set as a percentage of par.
- See alsoDiscountPremiumCoupon
- Read more in the Library
- Pay cycleFMAN, MJSD, JAJOStructure
- The months in which an issue pays. Common quarterly preferred cycles are February, May, August and November; March, June, September and December; and January, April, July and October. Most covered-call and preferred ETFs pay monthly.
- See alsoPay date
- Pay dateStructure
- The date a dividend or distribution is credited to shareholders' accounts.
- See alsoEx-dividend datePay cycle
- Payment-in-kind incomePIKFunds
- Interest paid by adding to the loan's principal rather than in cash. A high share of PIK in a BDC's income can hide stress in coverage.
- See alsoNon-accrualNet investment income
- Payout policyFunds
- How a covered-call ETF sets its payment: fixed dollars each period, a set rate on NAV, or a variable pass-through of option income. Buffer and barrier funds carry their own label, defined outcome. The desk infers the policy from the last year of payments, and the sponsor's stated policy overrides the inference.
- See alsoYield SustainabilityNAV Half-LifeDistribution RunwayManaged distribution
- PerpetualStructure
- An issue with no maturity date; it stays outstanding until the issuer calls it. Most preferred stocks are perpetual; every baby bond has a stated maturity.
- See alsoMaturity dateCallableDuration
- PillarThe score
- One of the weighted groups of measures that make up the score. Preferreds have five: Coverage, Credit, Buyback economics, Structure and Protection. BDCs and covered-call ETFs have their own sets; the methodology lists each with its weight.
- See alsoIncome Quality ScoreDividend coverageCall protection
- PlanStarter, Plus, EliteUsing YieldDesk
- YieldDesk's three subscription plans. Starter is free; Plus opens the full desk; Elite raises the remaining limits and adds the mobile app. See pricing.
- See alsoWatchlist
- Preferred ETFFunds
- An exchange-traded fund that holds a basket of preferred stocks, often with baby bonds and trust preferreds. It trades like a stock and pays monthly. YieldDesk scores each fund and the book it holds; see Book IQS.
- See alsoBook IQSSEC yieldInvestment-grade share
- Preferred stockpreferred, preferredsStructure
- An equity security that ranks above common stock and below all debt, and pays a fixed or floating dividend. It behaves more like a bond than a stock: a set payment, usually no vote, and usually a call date. Most are perpetual.
- See alsoBaby bondCapital rankCumulative
- Read more in the Library
- Price crosses parUsing YieldDesk
- An alert that fires when an issue's price crosses its par value, rising above it or falling below it.
- See alsoPar valueInbox
- Put writingFunds
- Selling put options for income. The fund collects a premium and agrees to buy the underlying at the strike if it falls below it: the losses of owning the shares, with gains limited to the premium.
- See alsoSynthetic covered callDefined outcome
Q
- Qualified dividend incomeQDI, qualified dividendTax
- Dividends taxed at the long-term capital gains rate rather than as ordinary income. Most dividends on U.S. preferred stock qualify if the holding period is met; baby bond interest does not, nor do most REIT and BDC distributions.
- See alsoOrdinary dividendHolding periodCharacter
- Read more in the Library
R
- Rate shockYield and price
- A scenario that moves interest rates by a set amount at once. The Rate Sensitivity calculator estimates the resulting price change from duration and convexity.
- See alsoDurationConvexity
- Real yieldTIPS yieldRates
- The yield on Treasury Inflation-Protected Securities: the return above inflation. The Forward Rate Monitor shows the 30-year real yield.
- See alsoInflation breakeven
- Registered fundclosed-end fundStructure
- An investment company registered under the Investment Company Act of 1940, such as a closed-end fund. Its preferreds and notes are subject to the act's asset coverage floors.
- See alsoFund-issued preferredAsset coverage
- Regular dividend yieldregular yieldYield and price
- For a BDC, the regular distribution annualized and divided by the price. Supplemental and special distributions are left out, so the figure shows what the base payout alone yields. The BDC table leads with it.
- See alsoAll-in yieldSupplemental dividendBusiness development company
- REIT preferredStructure
- Preferred stock issued by a real estate investment trust. Its dividends are generally not qualified; most are ordinary income eligible for the deduction under Section 199A.
- See alsoSection 199AQualified dividend incomeOrdinary dividend
- Reset dateStructure
- For a fixed-to-floating issue, the date its coupon switches from fixed to floating; for a fixed-rate reset, each date its coupon is set again.
- See alsoFixed-to-floatingFixed-rate resetReset spread
- Reset spreadStructure
- The fixed margin over the benchmark that a coupon pays after a reset. An issue quoted at SOFR + 385 pays the prevailing SOFR plus 3.85 percentage points.
- See alsoReset dateSOFRBreakeven SOFR
- Return of capitalROCTax
- The part of a distribution not characterized as earnings for tax. It lowers the holder's cost basis, and the tax falls due when the shares are sold. The label records how a payout is taxed, not whether the fund earned it; Yield Sustainability answers that from the fund's NAV and distributions. The ROC After-Tax Yield calculator shows the effect.
- See alsoYield SustainabilityReturn of capital, constructive or destructiveCost basisCharacter
- Return of capital, constructive or destructiveconstructive ROC, destructive ROCTax
- Older shorthand for reading the return-of-capital share beside one-year total return. The tax label does not show whether a payout was earned: funds that write index options under Section 1256 can report most of a distribution as return of capital while NAV grows, and a fund can report none while paying the holder's own capital back. The desk now judges the payout by Yield Sustainability, which compares what the fund earned with what it paid.
- See alsoYield SustainabilityReturn of capitalTax ROC
S
- Score stateSound, Match, FragileThe score
- The three-way reading on score pills, seals and the Dashboard: Sound at 8 and above, Match from 5 to below 8, and Fragile below 5. It uses the same scale as the IQS band, with Good and Average read together as Match.
- See alsoIQS bandIncome Quality Score
- SEC yield30-day SEC yieldYield and price
- A standardized yield every fund must report under Securities and Exchange Commission rules: net investment income over the latest 30 days, after expenses, annualized over the share price. Because every fund computes it the same way, it compares preferred ETFs more fairly than their distribution rates do.
- See alsoTrailing twelve-month yieldExpense ratioPreferred ETF
- Section 1256Tax
- The tax rule for broad index options: gains and losses are taxed 60% long-term and 40% short-term whatever the holding period. Covered-call funds that write index options use it, and can characterize distributions as return of capital as a result.
- See alsoReturn of capital, constructive or destructiveCovered-call ETF
- Section 199A199ATax
- The deduction of 20% of qualified REIT dividends under Section 199A of the tax code, which lowers the federal rate on REIT ordinary dividends. The Tax Center shows REIT income after it.
- See alsoREIT preferredOrdinary dividend
- Senior noteStructure
- Unsecured debt that ranks ahead of the issuer's subordinated debt and its preferred stock. Most baby bonds are senior notes.
- See alsoCapital rankSubordinated noteBaby bond
- Senior securedStructure
- Debt backed by collateral and ranked first for repayment. In a BDC portfolio it covers first-lien loans and other senior secured loans; the first-lien share is one of the readings in the BDC score.
- See alsoFirst lienBusiness development company
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- SeriesStructure
- A single preferred issue from an issuer, with its own coupon, dates and terms. Bank of America's preferreds come in many series, each trading under its own ticker suffix.
- See alsoIssuerCUSIP
- Sheltered accounttax-advantaged account, IRA, RothTax
- An account whose income is not taxed as it arrives, such as a traditional IRA, a Roth IRA or a 401(k). The Tax Center leaves sheltered holdings out of the tax figures.
- See alsoAfter-tax income
- SOFRSecured Overnight Financing RateRates
- The Secured Overnight Financing Rate, the benchmark that replaced LIBOR for most U.S. dollar floating coupons. Floating coupons are quoted as SOFR plus a spread.
- See alsoFloating rateImplied SOFRReset spread
- Spillover incomeundistributed taxable incomeFunds
- Taxable income a BDC has earned but not yet distributed, which it may carry into the next tax year. A cushion that can fund the distribution when net investment income falls short.
- See alsoNet investment incomeBusiness development company
- Strike distancestrike OTM, out of the moneyFunds
- For a covered-call ETF, how far above the market price the written calls are struck. A wider distance leaves more room for gains before the strike; a narrower one collects more premium.
- See alsoOverwrite percentageBuy-write
- Stripped yieldYield and price
- Current yield with the accrued dividend taken out of the price. It removes the rise in price that builds between ex-dates, so issues can be compared on the same footing whatever the point in their pay cycle.
- See alsoCurrent yieldAccrued dividend
- Subordinated notejunior subordinated noteStructure
- Debt that ranks behind the issuer's senior debt and ahead of its preferred stock. Junior subordinated notes rank last among the debt, and some allow interest to be deferred for years without a default.
- See alsoCapital rankSenior noteTrust preferred
- Summary of Economic ProjectionsSEPRates
- Forecasts of growth, unemployment, inflation and the federal funds rate from each Federal Reserve policymaker, released after four of the eight scheduled FOMC meetings each year.
- See alsoDot plotFOMC
- Sunday digestnewsletterUsing YieldDesk
- YieldDesk's weekly email, sent every Sunday from the week's last close: rates, the mover of the week, price movers, alerts, new listings and the discount pool. Free to anyone who subscribes.
- See alsoInboxDiscount pool
- Supplemental dividendspecial dividend, supplementalFunds
- A distribution paid on top of the regular dividend, usually by a BDC with income above its regular payout. It is not promised to recur, and the regular dividend yield leaves it out.
- See alsoRegular dividend yieldAll-in yield
- SuspensionStructure
- An issuer's decision to skip a scheduled dividend. Cumulative preferreds accrue the missed payments; non-cumulative preferreds lose them.
- See alsoCumulativeNon-cumulative
- Synthetic covered callFunds
- A covered-call strategy that gains its exposure through options, swaps or notes rather than by owning the shares. The fund still sells calls for income, and also carries the risk of the instruments that stand in for the shares.
- See alsoCovered-call ETFPut writing
T
- Tax ROCDistribution sourceTax
- Return of capital as a share of a covered-call ETF's distributions, from the final 1099 where filed, else the 19a-1 estimate, else the audited fiscal note. It records how the payout is taxed. Whether the fund earned the payout is Yield Sustainability.
- See alsoReturn of capitalYield SustainabilityCovered-call ETF
- Tax-equivalent yieldTax
- The pre-tax yield a fully taxable holding must pay to match another after tax. It puts a qualified preferred dividend, a taxable baby bond and a municipal bond on one line. Computed in the Tax-Equivalent Yield calculator.
- See alsoQualified dividend incomeAfter-tax income
- Tolerance bandUsing YieldDesk
- An optional widening of a price alert, up to 10%, so it fires near the target rather than only at it. An alert for a price at or above $24.50 with a 5% band fires from $23.28; one for a price at or below $24.50 fires from $25.73.
- See alsoInbox
- Total returnYield and price
- The change in price plus distributions, with distributions reinvested. The fairest single measure of what a holding earned, and the check on a high distribution rate that the price is paying for.
- See alsoNAV erosionReturn of capital, constructive or destructive
- Trailing twelve-month yieldTTM yield, trailing yieldYield and price
- The distributions paid over the past twelve months divided by the current price. Backward-looking by design: a recent cut takes months to register in full.
- See alsoCurrent yieldSEC yield
- Trust preferredTruPSStructure
- A security issued by a trust that holds its parent's junior subordinated debt and passes the interest through as distributions. Common among banks before 2010; rules adopted since then removed most of its value as bank capital, and most issues have been redeemed.
- See alsoSubordinated noteFinancing vehicle
U
- Unrealized gain or lossTax
- The difference between a position's market value and its cost basis while the position is still held. It becomes realized, and taxable, when sold.
- See alsoCost basis
V
W
- WatchlistUsing YieldDesk
- A member's list of securities to follow: one on Starter, ten on Plus and unlimited on Elite. The Income Calendar and other screens can filter to a chosen list.
- See alsoPlanIncome Calendar
Y
- Yield on costYOC, YoCYield and price
- Annual income divided by what was paid for the position. It shows what a holding yields on the money put in, which matters to an investor who plans to hold to call or maturity.
- See alsoCost basisAfter-tax yield on cost
- Yield spreadYield and price
- The gap between a yield and its benchmark, quoted in basis points. Market Trends leads with the median yield of the universe over the 10-year Treasury: the pay for taking income-market risk.
- See also10-year TreasuryBasis point
- Yield Sustainabilitysustainability band, earned in full, partly earned, mostly principal, paid from principalFunds
- What a covered-call ETF earned against what it paid over its last 12 monthly or 52 weekly distributions, per $100 of NAV at the start and with every distribution taken in cash. Earned is the distributions plus the change in NAV. A fund is Earned in full when earned covers the payout or NAV slipped by less than 1% a year; Partly earned when it earned half or more; Mostly principal when it earned less than half; and Paid from principal when NAV fell by more than the fund paid out. Prices are adjusted for splits.
- See alsoNAV Half-LifeDistribution RunwayPayout policyNAV erosionTax ROC
- Yield to callYTCYield and price
- Total return if the issue is redeemed on its first call date at the call price: the income received plus the gain or loss between today's price and the call price. The relevant yield for an issue trading above par. Computed in the Yield to Call calculator.
- See alsoYield to worstCall datePremium
- Read more in the Library
- Yield to maturityYTMYield and price
- Total return if a baby bond is held to its maturity date and repaid at par: coupon income plus the move from today's price to par. The companion figure to yield to call for an issue with a stated maturity. Computed in the Yield to Maturity calculator.
- See alsoYield to callYield to worstMaturity date
- Yield to worstYTWYield and price
- The lowest of yield to call before the call date, yield to maturity and, for a perpetual issue, current yield: the return if events turn out least favorably for the holder. The figure fixed-income investors quote first, because it assumes nothing in the holder's favor.
- See alsoYield to callYield to maturityCurrent yield
- Read more in the Library