Stock Valuation Paper- 3 paragraphs needed (NEED BY 11/20/17- 5pm EST)

Stock Valuation

INTRODUCTION

Characteristics of Common and Preferred Stock

Investors can possess two distinct types of stock, each with distinctive rights in ownership and privileges. The first kind of stock is a common stock which proclaims ownership in an organization. This ownership empowers an individual to a value of the organization's cash flow. However, there is no assurance as to the exact amount the stockholder will receive. Furthermore, the common stockholder will only receive their share of the organization's profits once the company has paid their employees, taxes, creditors, supplies, etc. If the company "goes under" the stockholder is not automatically entitled to their share. The organization would first need to sell all of their assets and ensure their debt holders are paid. Only then can any remaining funds be distributed to the common stockholders. The positive side to owning a common stock is that there is no limit to the capacity of earnings on the investment (Brooks, 2016).

The other type of stock is a preferred stock. A preferred stockholder must get receive their pay out of dividends before they are distributed to common stockholders. When an organization declares bankruptcy or liquidation, a preferred stockholder will have precedence to the company's assets before the common stockholders. When handling preferred stock, there are two different types of dividends: cumulative and noncumulative. A cumulative dividend requires an organization to pay cash dividends at some future time still if it is skipped. A noncumulative dividend does not require the dividend to be still paid. If the business skips a payment of a dividend that dividend can be lost forever to the shareholder.

How Stock Markets Work

So how does one go about buying and selling stocks? There are two different types of stock markets that one needs to consider; primary markets and secondary markets. The stock market process commences with the development of the primary market. The primary market is where the first sale of a stock occurs. To begin, an owner/s decide to go public. The owner/s must then gain permission from the Securities and Exchange Commission (SEC) in order to administer common stock sales to the public. A document called a prospectus is then created. A prospectus supplies likely buyers with valuable data pertaining to the organization along with the forthcoming sale. Along with the prospectus, due diligence must be completed to ensure all information that is relevant to the sale is disclosed before the sale occurs (Brooks, 2016).

The secondary market is referred to as “used-stock” for several reasons. For starters, the secondary market allows existing common stockholders buy additional stock or sell their current stock. Another reason for the name “used-stock” is because it allows new stockholders to purchase their initial stock. In the secondary market, a specialist is assigned to every stock. The specialist is responsible for being prepared to sell and buy different shares at declared prices. Dealers post the pricing for both the price they would be willing to sell (asking price) and a price they are willing to buy (bid price). Individuals that are looking to buy and/or sell shares will present their orders which include their lowest asking price if they are buying or their highest bid if they are selling (Brooks, 2016).

Connection Between the Value of Shares and Dividends

Return from dividend stock consists on the rise in your stock prices and the corporate profits that the company pays out as a dividend on your shares of their stocks. You earn a profit when stock price rises. The connection between the dividends and stock prices would help to protect the value of your portfolio. We can see this by the company’s market reputation: when company go down and go up, what are the company signals and the anticipating dividends. When dividends go up, buyers will buy more stocks and this will increase the demand will cause the sellers will increase the prices to earn more profits. Dividends go down by the stock go down in price will reduce the investor's demand, and in this case, the investors face the losses.

Stock prices of Walmart since 1972 have been splits and have given dividends. OHLC data has been open high low close for the multiple data ranges percentages. The latest closing price for Walmart as of November 17, 2017 is 97.47. (macrotrends, 2010). Shown as under in the graph:

Walmart had played yield and dividends since 1989. The current ongoing dividend yield by Walmart store until November 17, 2017 is 2.09% as shown in graph below:

Investing

Wal-Mart stores Inc ticker is WMT. Current stock price of WMT is $97.47 as of 11/18/2017. WMT stocks are at the highest cost since they were. I wouldn’t recommend on buying a stock from WMT since their stocks are at the highest rate right now. After reviewing their financial history, it looks like purchasing a stock would be a high risk as well. The WMT stock market is variable and is at the maximum amount for a stock purchases right now. Last year its lowest stock amount was $56.42 and today it is at $97.47. I predict the stock price will drop and then I would recommend on buying a stock if it gets near the price of $50 again. If so, I think it would still be a risk, but it wouldn’t be as high as a risk as it is right now.

CONCLUSION

References

Brooks, R.M. (2016). Financial Management: Core Concepts (3rd ed.). Pearson Education