Category: Financial Terms

Dollarization Dollarization is the process by which a country adopts a foreign currency—most commonly the U.S. dollar—as a medium of exchange or legal tender alongside or instead of its domestic currency. It often emerges in response to severe inflation or chronic economic instability that erodes confidence in the local currency. Key takeaways Dollarization replaces or…

Dollar Duration (DV01) What it is Dollar duration, commonly called DV01 (dollar value of an 01) or money duration, quantifies how much a bond’s price changes in dollar terms for a small change in yield. It converts percentage sensitivity (duration) into a dollar amount, which is useful for measuring and hedging interest-rate risk. Core formulae…

Dollar-Cost Averaging (DCA) What is DCA? Dollar-cost averaging (DCA) is an investment strategy in which you invest a fixed amount of money at regular intervals, regardless of the asset’s price. The goal is to reduce the impact of short-term volatility, avoid trying to time the market, and build a position steadily over time. Key takeaways…

Doji Candlestick Pattern What is a doji? A doji is a single candlestick in which the open and close price are virtually the same, producing a very small or nonexistent body. It often looks like a cross, inverted cross, or plus sign. The Japanese word doji means “the same thing,” reflecting the equality of open…

Dogs of the Dow Key takeaways Dogs of the Dow is a simple dividend‑focused strategy that picks the 10 highest‑yielding stocks from the 30 components of the Dow Jones Industrial Average (DJIA) each year. Implementation: select the 10 highest dividend yields on the last trading day of the year, invest equal amounts in each on…

Dodd-Frank Wall Street Reform and Consumer Protection Act What it is The Dodd‑Frank Act is a sweeping set of U.S. financial reforms enacted in 2010 in response to the 2007–2008 financial crisis. Its goals were to reduce systemic risk, protect consumers from abusive financial practices, increase transparency in financial markets, and limit the likelihood that…

Documentary Collection: Definition, Types, and How It Works What is documentary collection? Documentary collection is a trade finance method in which an exporter’s bank forwards shipping and title documents to the importer’s bank and collects payment (or acceptance of a draft) before the importer obtains those documents. The documents—such as a commercial invoice, bill of…

Dividend Yield What it is Dividend yield measures the annual cash dividends paid by a company relative to its current share price. It expresses the dividend return as a percentage and indicates how much income an investor might expect from dividends alone (excluding capital gains). How it works Dividends are typically paid from a company’s…

Dividend Reinvestment Plans (DRIPs): Compound Your Earnings What is a DRIP? A Dividend Reinvestment Plan (DRIP) lets shareholders automatically use cash dividends to buy additional shares—or fractional shares—of the same company instead of receiving the dividend in cash. Many DRIPs allow purchases commission-free and sometimes at a discount to the market price, enabling systematic accumulation…

Dividends Received Deduction (DRD): A Practical Guide Key takeaways * The Dividends Received Deduction (DRD) lets U.S. corporations deduct a portion of dividends received from other corporations to reduce double or triple taxation. * The deduction percentage depends on ownership in the dividend-paying company and whether dividends are domestic or foreign. * Certain dividends (e.g.,…

Dividend Recapitalization: Definition, Process, Example, and Key Considerations What is a dividend recapitalization? A dividend recapitalization (dividend recap) is a transaction in which a company takes on new debt and uses the proceeds to pay a special dividend to shareholders. Private equity sponsors commonly use this strategy to return capital to investors before an exit…

Understanding Dividend Rate The dividend rate is the total expected dividend payments from an investment (per share) expressed on an annualized basis, including any non‑recurring (extra) dividends paid during the year. It is a dollar amount—typically quoted as “$X.XX per share per year.” Dividend rate is related to, but distinct from, dividend yield: yield expresses…

Understanding Dividend Policy Key takeaways * A dividend policy is a company’s formal approach to distributing profits to shareholders, specifying frequency, timing, and amount. * Dividend policies signal financial priorities—income distribution versus reinvestment—and affect investor expectations and the company’s cost of capital. * Common policies include stable, constant (payout-ratio), residual, no-dividend, and hybrid approaches. *…

Dividend Per Share (DPS): Definition, Calculation, and Why It Matters What is DPS? Dividend per share (DPS) is the cash dividend a company pays for each ordinary share outstanding over a given period (typically a quarter or year). It is a direct measure of the income a shareholder receives from owning a share. Key takeaways…

Dividend Payout Ratio The dividend payout ratio shows the portion of a company’s earnings paid to shareholders as dividends. Expressed as a percentage, it helps investors assess how much profit a company returns to owners versus reinvesting for growth, paying down debt, or building cash reserves. What it measures Proportion of net income distributed to…

Dividend Irrelevance Theory Dividend Irrelevance Theory, formulated by Merton Miller and Franco Modigliani in 1961, argues that a company’s dividend policy does not affect its market value or stock price in an efficient market. The theory asserts that investors are indifferent between dividends and capital gains because any cash distributed as dividends reduces the firm’s…

Dividend Growth Rate The dividend growth rate is the annualized percentage change in a company’s dividend payments over time. It helps investors assess a firm’s financial health, estimate future income, and value stocks using dividend-based models like the dividend discount model (DDM). Historical dividend growth is often used as a proxy for future dividend potential…

Dividend Discount Model (DDM) Key takeaways The Dividend Discount Model values a stock as the present value of its expected future dividends. It works best for mature, dividend-paying companies with predictable payouts. The Gordon Growth Model (GGM) is the most common DDM variant and assumes constant dividend growth: Price = D1 / (r − g)….

Dividends: What They Are and How They Work Key takeaways A dividend is a distribution of a company’s profits to shareholders, typically in cash or additional shares. Dividend payments and amounts are set by a company’s board of directors and may be regular (quarterly, monthly, annual) or special (one-time). Not all companies pay dividends—many growth…

What Is Divestment? Divestment is the process by which a company sells or disposes of assets, business units, subsidiaries, or investments to sharpen strategic focus, improve financial health, or comply with legal, regulatory, or social pressures. It’s the opposite of acquiring or investing and is used to reallocate resources, reduce complexity, or respond to external…

Divestiture: Definition, Reasons, and Examples What is a divestiture? A divestiture is the partial or full disposal of a company’s operations or assets through sale, exchange, spin-off, closure, or bankruptcy. It typically involves selling a business unit, asset, or subsidiary so the company can focus on core activities, raise cash, reduce debt, or meet regulatory…

Diversified Company: Definition, How It Works, Benefits and Downsides What is a diversified company? A diversified company owns or operates multiple businesses or product lines that are unrelated or operate in different markets. Unrelated businesses typically: Require distinct management expertise Serve different end customers Produce different products or offer different services How diversification happens Companies…

Diversification: Definition, Strategies, Risks, and Measurement What is diversification? Diversification is an investment risk‑management strategy that spreads capital across different asset types, sectors, geographies, and risk profiles so that poor performance in any single holding has less impact on the overall portfolio. The goal is to reduce unsystematic (idiosyncratic) risk while improving the potential for…

Divergence in Technical Analysis Definition Divergence occurs when an asset’s price moves in the opposite direction of a related technical indicator or oscillator. It signals a change in momentum that can precede a shift in the price trend. Traders watch divergence as an early warning that a trend may be weakening or reversing. Types of…

Distribution Yield: Definition, Calculation, and What It Tells Investors What is distribution yield? Distribution yield measures the cash flow an income-paying security (for example, an ETF, mutual fund, or REIT) delivers to investors. It annualizes the most recent distribution and expresses it as a percentage of the security’s net asset value (NAV) at the time…

Distribution Waterfall in Private Equity What is a distribution waterfall? A distribution waterfall is the structured, tiered method private equity funds use to allocate realized returns among investors—typically limited partners (LPs) and the general partner (GP). Capital from asset sales flows through sequential tiers; each tier must be satisfied before distributions move to the next….

Distribution Network: Definition, How It Works, and Examples What is a distribution network? A distribution network is the system of storage facilities, handling operations, and transportation methods that moves finished goods from manufacturers to end customers. It sits between production and the point of sale (or the consumer), supporting the flow of inventory through wholesalers,…

Distribution Management Distribution management is the process of overseeing the flow of goods from manufacturers or suppliers to the point of sale or the end user. It covers physical movement and the supporting functions that ensure products arrive at the right place, at the right time, and in the right condition. Core elements Packaging and…

Distribution-in-Kind: Definition, How It Works, and Key Considerations What is a distribution-in-kind? A distribution-in-kind (also called a distribution-in-specie) is a payment made in the form of securities or other property rather than cash. Examples include stock dividends, the transfer of shares from a fund to a shareholder, or the delivery of real estate or other…

Distribution Channels A distribution channel is the network of businesses and intermediaries through which a good or service moves from the producer to the end consumer. Channels shape how customers access products, affect costs and margins, and are a core element of a company’s marketing and supply-chain strategy. Key takeaways Distribution channels move products from…

Understanding Financial Distributions Key takeaways * A distribution is the transfer of assets (cash or securities) from a fund, account, or issuer to an investor or beneficiary. * Distributions commonly appear as dividends, interest, or capital gains and can affect a fund’s net asset value (NAV). * Retirement account distributions have age-based rules, potential taxes,…

Distributed Ledgers Distributed ledgers are digital records of transactions that are stored and synchronized across multiple computers (nodes) in different locations. Instead of a single centralized database, each node keeps a copy of the ledger and the network enforces rules to compare and validate changes, reducing the risk of tampering and central points of failure….

Distributed Ledger Technology (DLT) Distributed Ledger Technology (DLT) is a method of storing and synchronizing records across multiple computers (nodes) in a network without a centralized authority. It uses cryptography and consensus rules to validate and record changes, improving data integrity, transparency, and resilience. Key takeaways DLT enables decentralized, tamper-resistant record-keeping across a network of…

Distributable Net Income (DNI) Distributable Net Income (DNI) is the tax concept that determines the maximum amount of a trust’s or estate’s income that can be passed through to beneficiaries and taxed at the beneficiary level. It prevents double taxation by identifying what portion of an estate or trust’s income is taxable to recipients rather…

Distressed Securities Distressed securities are financial instruments issued by companies that are near or in bankruptcy. They include common and preferred equity, corporate bonds, bank debt, and trade claims. Distress can also arise when a company breaches covenants attached to its debt or other securities, signaling deteriorating creditworthiness and sharply reduced market value. Key takeaways…