Which of the following is the best definition of stripped common shares?

A) Stocks attract particular groups based on dividend yield and the resulting tax effects.
B) Price range between highest and lowest prices at which a stock is traded.
C) A firm's long-term desired dividend-to-earnings ratio.
D) Common stock on which dividends and capital gains are repackaged and sold separately.
E) An increase in a firm's shares outstanding without any change in owner's equity.

Question

Alexis Duran · Accepted Answer

Final Answer : D, Explanation :  Stripped common shares are a form of financial instrument where the rights to dividends and the capital gains of a common stock are separated (or stripped) and sold individually. This allows investors to invest specifically in the income or growth aspect of a stock, depending on their investment goals.

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