What is Yield Advantage?
The yield advantage is an essential tool in understanding the relationship between the convertible securities that are in the possession of a corporation and the amount of dividend yield on the common stock issued by the company. By comparing the two factors, it is possible to determine if the corporation is choosing a wise financial path by holding on to a convertible security rather than exchanging the convertibles for more shares of the stock. Many companies employ the calculation of the yield advantage on at least a quarterly basis. Any corporation that wishes to remain stable will seek to make the most profitable use of available resources. This may involve owning more shares of common stock instead of securing convertible securities. When the yield for all investments is calculated by subtracting the dividend yield on common stock from the yield on the convertibles, it is possible to determine if the ratio between the two assets is indeed within a desirable range. The yield advan
