Category 13
Income concepts and terms
The vocabulary the rest of the site uses: what each number means, how it is calculated, and how it misleads.
Everything in this category is paid the same way, so what separates one page from the next is the wrapper rather than where the money comes from: how much it takes to start, how quickly you could turn it back into cash, who does the work, how it is taxed, and how it fails. The line on each card says whether the income keeps arriving once it is set up or whether somebody has to keep working for it. If the mechanism itself is new to you, the course spends a whole lesson on it and is a shorter way in than any single page here.
Dividend Reinvestment Plans (DRIPs)
A standing instruction to buy more of the same security with every distribution instead of taking the cash — automatic compounding that changes nothing about the tax bill.
Read →Funds From Operations (FFO and AFFO)
The REIT industry's substitute for earnings: net income with real-estate depreciation added back, because buildings are written down on a schedule that has nothing to do with the rent they collect.
Read →Return of Capital in a Distribution
The part of a payout that is not income at all: your own capital handed back, untaxed today, at the cost of a lower basis and a larger gain later.
Read →Total Return vs Income
Income plus price change measured together — the only way to see whether a payout was earned or paid out of the position itself.
Read →Distribution Coverage
The test that asks whether a payout came out of what the payer earned — and, when it did not, where the rest came from.
Read →Net Asset Value, Premiums and Discounts
What a fund owns per share, and what the market charges you for it — two numbers that agree by design in an ETF and can diverge for years in a closed-end fund.
Read →Expense Ratios and What They Cost Income
The annual percentage a fund deducts from its own assets before anything reaches you — small measured against a price, large measured against a yield.
Read →Asset Location: Which Account Holds Which Income
Not what you own but where you own it — the same holding is taxed three different ways depending on the account it sits in.
Read →Yield to Maturity
The single discount rate that makes the present value of a bond's remaining payments equal its price today — the number quoted whenever a bond's "yield" is named.
Read →Duration and Interest-Rate Risk
A measure of how far a bond's price moves when yields change — expressed in years, but read as a sensitivity.
Read →Credit Ratings
A letter grade published by a rating agency estimating how likely a borrower is to pay — an opinion with regulatory force, not a measurement.
Read →Callable Bonds and Call Risk
A bond the issuer may repay early at a set price on set dates — you have sold an option, and the extra yield is the premium you were paid for it.
Read →Bond and CD Ladders
Splitting money across several maturity dates so something matures on a regular schedule, turning locked-up money into a rolling stream.
Read →Taxable-Equivalent Yield
The yield a fully taxable bond would have to pay to leave you with the same after-tax income as a tax-exempt one.
Read →Series I Savings Bonds
A savings bond bought directly from the US Treasury whose rate combines a fixed rate locked for the life of the bond with an inflation component reset every six months.
Read →Collateralised Loan Obligations (CLOs)
A managed pool of corporate loans financed by issuing tranches with different priorities — the top tranches are paid first, the bottom one takes the first losses.
Read →Dividend Yield
The annual dividend divided by the share price — a ratio that moves whenever either number moves, and most often because the price moved.
Read →Payout Ratio
The share of what a company earns that it hands over as dividends — the standard first check on whether a payment has room to survive a bad year.
Read →Ex-Dividend Date and the Four Dividend Dates
Four dates govern every dividend — declaration, ex-dividend, record and payment — and only one of them decides whether you get paid.
Read →Qualified vs Ordinary Dividends
Two federal tax rates apply to dividends. Which one you pay depends on what paid the dividend and how long you held the shares.
Read →Dividend Cuts and Suspensions
A common dividend is a decision, not an obligation — a board can reduce it, suspend it or end it at any meeting.
Read →Yield Traps
A quoted yield you will not receive — either because the payment is about to change, or because the number was never income in the first place.
Read →Dividend Growth Investing
An approach organised around the rate at which a payment rises rather than the size of the payment today.
Read →Dividend Aristocrats and Dividend Kings
Labels for long runs of consecutive dividend increases — one an index with published rules, the other a screen with a widely used definition.
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