Podcast
Questions and Answers
What is the settlement date for a stock transaction made on Monday, June 13?
What is the settlement date for a stock transaction made on Monday, June 13?
- Thursday, June 16
- Monday, June 15
- Tuesday, June 14 (correct)
- Wednesday, June 14
Dividends reinvested through a dividend reinvestment plan are treated as what for tax purposes?
Dividends reinvested through a dividend reinvestment plan are treated as what for tax purposes?
- Non-taxable income
- Tax-free reinvestments
- Capital gains
- Ordinary cash dividends (correct)
What trading status is applicable for stock traded on Thursday, June 9?
What trading status is applicable for stock traded on Thursday, June 9?
- Cum dividend (correct)
- Ex-dividend
- Deferred payment
- Ineligible for dividends
When are share purchases typically made in dividend reinvestment plans?
When are share purchases typically made in dividend reinvestment plans?
Which date would not be considered for the settlement of a stock transaction conducted on Friday, June 10?
Which date would not be considered for the settlement of a stock transaction conducted on Friday, June 10?
What unique feature do some dividend reinvestment plans include for participating shareholders?
What unique feature do some dividend reinvestment plans include for participating shareholders?
What is the effect of weekends on the settlement date of stock transactions?
What is the effect of weekends on the settlement date of stock transactions?
If a stock is traded on Tuesday, June 14, what is its status in terms of dividends?
If a stock is traded on Tuesday, June 14, what is its status in terms of dividends?
What is one way major Canadian stock exchanges communicate dividend announcements?
What is one way major Canadian stock exchanges communicate dividend announcements?
What distinguishes the CAC 40 Index from other stock indexes?
What distinguishes the CAC 40 Index from other stock indexes?
Which index specifically consists of the largest companies in Switzerland?
Which index specifically consists of the largest companies in Switzerland?
What is a key feature of the MSCI Canada ESG Leaders Index compared to the broader MSCI Canada Index?
What is a key feature of the MSCI Canada ESG Leaders Index compared to the broader MSCI Canada Index?
Which of the following accurately describes the MSCI World ESG Leaders Index?
Which of the following accurately describes the MSCI World ESG Leaders Index?
In the context of global interest in stock markets, which countries have become focal points over the last 30 years?
In the context of global interest in stock markets, which countries have become focal points over the last 30 years?
What common characteristic is shared by companies in environmental, social, and governance indexes?
What common characteristic is shared by companies in environmental, social, and governance indexes?
What is the main advantage of a dividend reinvestment plan for shareholders?
What is the main advantage of a dividend reinvestment plan for shareholders?
How are stock dividends typically treated for tax purposes?
How are stock dividends typically treated for tax purposes?
What distinguishes common shares in terms of voting privileges?
What distinguishes common shares in terms of voting privileges?
What is the concept of dollar cost averaging in the context of dividend reinvestment?
What is the concept of dollar cost averaging in the context of dividend reinvestment?
Why might a company choose to pay stock dividends instead of cash dividends?
Why might a company choose to pay stock dividends instead of cash dividends?
What is a common concern for individual shareholders when purchasing odd lots of shares?
What is a common concern for individual shareholders when purchasing odd lots of shares?
Which of the following is a characteristic feature of preferred shares compared to common shares?
Which of the following is a characteristic feature of preferred shares compared to common shares?
During which meetings do common shareholders typically exercise their voting rights?
During which meetings do common shareholders typically exercise their voting rights?
In what way do stock dividends affect a company's retained earnings?
In what way do stock dividends affect a company's retained earnings?
Which type of shareholder is most likely to opt for cash dividends when given a choice?
Which type of shareholder is most likely to opt for cash dividends when given a choice?
What is the primary purpose of a reverse stock split for a company?
What is the primary purpose of a reverse stock split for a company?
What major disadvantage may investors face when dealing with international stocks?
What major disadvantage may investors face when dealing with international stocks?
When Conner sold his U.S. stock for a 12% gain, how much did he actually receive upon converting back to Canadian currency?
When Conner sold his U.S. stock for a 12% gain, how much did he actually receive upon converting back to Canadian currency?
How are Canadian Depositary Receipts (CDRs) primarily beneficial to Canadian investors?
How are Canadian Depositary Receipts (CDRs) primarily beneficial to Canadian investors?
What percentage of the world’s capital markets does Canada approximately represent?
What percentage of the world’s capital markets does Canada approximately represent?
What was the trading value of the Canadian dollar when Conner initiated his investment?
What was the trading value of the Canadian dollar when Conner initiated his investment?
What is one of the risks associated with investing in international stocks?
What is one of the risks associated with investing in international stocks?
Why might some international company shares be considered inaccessible to investors?
Why might some international company shares be considered inaccessible to investors?
Which of the following best describes the result of Conner's investment after three months?
Which of the following best describes the result of Conner's investment after three months?
What action did Conner take when he invested in U.S. stocks?
What action did Conner take when he invested in U.S. stocks?
What primarily influences how much investors are willing to pay for preferred shares?
What primarily influences how much investors are willing to pay for preferred shares?
In the event of bankruptcy, which group does not rank above preferred shareholders?
In the event of bankruptcy, which group does not rank above preferred shareholders?
What is a significant impact of a decrease in perceived creditworthiness of an issuer on preferred shares?
What is a significant impact of a decrease in perceived creditworthiness of an issuer on preferred shares?
Why do many issuers obtain a credit rating for their preferred shares?
Why do many issuers obtain a credit rating for their preferred shares?
What is the primary reason that call risk limits the upside price potential of preferred shares?
What is the primary reason that call risk limits the upside price potential of preferred shares?
How does extension risk arise for preferred shares?
How does extension risk arise for preferred shares?
What type of preferred shares are likely to experience the biggest price declines due to creditworthiness concerns?
What type of preferred shares are likely to experience the biggest price declines due to creditworthiness concerns?
Which rating agencies are known for publishing preferred share credit ratings in Canada?
Which rating agencies are known for publishing preferred share credit ratings in Canada?
What is typically the consequence for investors if preferred shares are trading at a premium to their par value?
What is typically the consequence for investors if preferred shares are trading at a premium to their par value?
Study Notes
Stock Transactions and Dividend Timing
- Weekends are excluded in calculating the settlement date for stock transactions, which affects when dividends are classified as cum or ex-dividend.
- Cum dividend indicates entitlement to the dividend, while ex-dividend denotes that the stock purchased will not pay the upcoming dividend.
Dividend Reinvestment Plans (DRIPs)
- Shareholders can opt into automatic plans where dividends are reinvested to purchase additional shares.
- Reinvested dividends are taxable as ordinary cash dividends despite not being received as cash.
- Plans facilitate fractional share purchases, which are typically not available on the market for individual investors.
- DRIPs are considered an automatic savings method, allowing gradual accumulation of shares at a reduced average cost (dollar cost averaging).
Stock Dividends
- Some companies issue stock dividends during rapid growth instead of cash dividends to retain earnings.
- Shareholders have the option to sell stock dividends for cash, and these dividends are recorded similarly to cash dividends for accounting purposes.
Voting Privileges of Common Shares
- Common shareholders generally have one vote per share, allowing them to influence company decisions at meetings.
- Companies may issue different classes of shares (e.g., Class A, B, C) with varying voting rights and dividend entitlements.
Canadian Depositary Receipts (CDRs)
- CDRs enable Canadian investors to access U.S. and global companies listed on major exchanges such as NYSE and NASDAQ, mitigating exchange rate risks.
- CDRs are traded in Canadian dollars, simplifying cross-border investment.
Credit Risk in Preferred Shares
- Investors evaluate the creditworthiness of preferred share issuers, as preferred shares rank below other creditors in bankruptcy situations.
- A decrease in perceived creditworthiness can lead to a decline in the value of preferred shares, particularly for fixed-rate, perpetual preferred shares.
Call Risk
- Most preferred shares are callable, meaning issuers can redeem them, which limits potential price gains for investors.
- Investors might avoid pushing prices high due to the potential for early redemption at a premium.
Extension Risk
- A lack of a retraction feature on preferred shares results in extension risk, leaving the issuer solely responsible for deciding when to return par value to investors.
Key Stock Market Indices
- The CAC 40 Index consists of the 40 largest companies on the Paris Stock Exchange, calculated based on market capitalization.
- The Swiss Market Index includes 20 of Switzerland's largest and most liquid stocks, serving as a benchmark for blue-chip stocks.
Environmental, Social, and Governance (ESG) Indexes
- ESG indexes comprise companies with strong ESG performance, evaluated by third-party firms.
- The MSCI Canada ESG Leaders Index has outperformed broader market indexes since its inception in 2007, showing resilience during market downturns.
- The MSCI World ESG Leaders Index provides exposure to companies with strong ESG ratings while excluding those with harmful environmental or social impacts.
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Description
This quiz focuses on understanding the settlement dates of stock transactions, highlighting the role of weekends and the distinction between cum dividend and ex-dividend trading. Test your knowledge on how these factors influence trading dates and settlement processes.
