Important Terms
- Returns: Predictable dividend, often franked therefore possible tax advantage to the holder
- Capital price:
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- Price moves in line with share price (fixed conversion terms e.g. 1 hybrid convert to 1 share)
- Bond like, price does not move in line with share price (variable conversion terms, face value (usually $100) convert to $100 worth of shares).
- Discount: A discount is usually offered to the share price at the time of conversion.
- Reset/resettable: At the reset date the terms of the security (dividend rate, next reset date) may change. The holder can elect to accept the new reset terms or convert into shares.
- Cumulative/non-cumulative This refers to the event of missed dividend payments.
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- Cumulative: missed dividend payments are added to the next dividend payment.
- Non-cumulative: missed dividend payments are forgone.
- Redeemable/non-redeemable
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- Redeemable: At certain times the holder may have the option to sell the securities back to the company at the face value/issue price.
- Non-redeemable / irredeemable: The company is not offering to buy the securities back.
Read more about this topic: Hybrid Security
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