Glossary

The income investor’s vocabulary

Plain-language definitions for the terms used across the YieldDesk product: preferred stocks, baby bonds, BDCs, covered-call ETFs and the IQS methodology. Every term used on the site is defined here.

A

ADV (Average Daily Volume): The average number of shares of an issue traded per day, typically over a 30-day window. Used as a proxy for liquidity: lower ADV means wider bid-ask spreads and harder exits.
After-Tax Income: Annual income after the saved tax rates (Settings, Tax defaults). QDI-eligible preferred dividends are taxed at the long-term capital gains rate plus NIIT; ETD interest and most BDC and covered-call distributions at ordinary rates plus state tax and NIIT. Shown on the Dashboard and Holdings.
After-Tax Yield on Cost (After-Tax YOC): After-tax income divided by cost basis. The gap between yield on cost and after-tax YOC is the tax haircut on the income.
AUM (Assets Under Management): The total assets a fund manages. On the ETF and BDC shelves, a scale indicator: larger funds tend to trade tighter and borrow cheaper.

B

Baby Bond: Exchange-traded debt (ETD): a corporate bond with a $25 par value that trades on a stock exchange instead of the OTC bond market. Pays a fixed coupon, has a stated maturity date, and sits ahead of preferred stock in the capital structure.
Basis Point (bps): One hundredth of a percentage point. Yield spreads and rate moves are quoted in basis points; a move from 4.50% to 4.75% is 25 bps.
BDC (Business Development Company): A publicly listed investment company that lends to private middle-market businesses. Required to distribute at least 90% of taxable income; distribution yields commonly run 8 to 12%. Examples: ARCC, MAIN, OBDC.
Breakeven SOFR: For a fixed-to-floating issue, the SOFR level at which the floating coupon would equal the fixed coupon it replaces. If SOFR sits above breakeven at reset, the coupon steps up; below, it steps down. Computed in the calculators.
Buy-Write: An options strategy where a fund holds shares of an underlying portfolio and sells (writes) covered call options against them. The premium collected funds distributions; upside above the strike is given up.

C

Call Date: The first date on which an issuer can redeem a preferred stock or baby bond, typically at par. Issues are usually called when refinancing becomes cheaper than the current coupon.
Call Protection: The time remaining until an issue's call date. The IQS reads it together with price under the Buyback economics measure: more years of protection score higher, non-callable issues receive full credit, and past the date a deep discount scores well because a redemption would hand the holder a gain.
Call Window: The period that begins on the call date, during which the issuer may redeem the issue at par at any time. An alert can fire when a watched issue's call window opens.
Callable: An issue the issuer may redeem on or after its call date. Non-callable issues have no call date. Most preferreds are both callable and perpetual; the terms are independent.
Confidence (IQS): The share of an issue's IQS weight that could be scored from available data: high at 85% or more, medium at 60%, low below that. Missing factors are dropped and the remaining weights renormalized rather than guessed.
Convertible Preferred: A preferred stock that can be exchanged for the issuer's common shares at a set ratio. Trades partly on its income and partly on the value of that conversion option.
Convexity: The curvature in an issue's price-rate relationship. Duration alone understates gains and overstates losses on large rate moves; convexity is the correction. Used in the Duration & Convexity calculator.
Cost Basis: The total amount paid for a position, including fees. The denominator for yield on cost, after-tax YOC and unrealized gain or loss.
Coupon: The fixed annual interest or dividend rate, stated as a percentage of par value. A 6.5% coupon on a $25 par issue pays $1.625 per share per year.
Coupon Type: Fixed (constant rate forever or until reset), floating (tied to a benchmark like SOFR), or fixed-to-floating (fixed until a reset date, then floats over a benchmark).
Covered-Call ETF: An ETF that holds an underlying equity portfolio and sells call options against it to generate income. Distribution rates commonly run 8 to 14%; upside above the strike is capped. Examples: JEPI, JEPQ, QYLD, XYLD.
Credit Quality: YieldDesk's classification of an issue's credit standing, taken from the best available agency rating: Investment grade, High yield or Not rated. Letter grades are not displayed. Unrated issues leave the IQS credit measure unscored rather than assumed.
Cumulative: A preferred stock structure where any skipped dividends accrue and must be paid in full before common shareholders receive any. Non-cumulative preferreds lose skipped dividends permanently.
Current Yield: Annual distribution divided by current price. The headline number on a quote screen. Does not account for call risk or duration.

D

Declaration Date: The date the issuer announces an upcoming dividend or distribution. Shows up in the YieldDesk alerts feed when a watched issue declares.
Depositary Share: A share that represents a fractional interest (often 1/1,000th) in an underlying preferred stock. Most NYSE-listed preferreds are technically depositary shares.
Discount: A market price below par value. Often quoted as a percentage: “trades at a 3.2% discount to par.”
Distribution: A general term for any payment made by an ETF or BDC to shareholders. Distinguished from “dividend” because the payment may include return of capital or option premium, not just earnings.
Distribution Source: Where a covered-call ETF’s distribution comes from, judged by pairing the return-of-capital share with one-year total return. Labelled on YieldDesk as Earned income, Constructive ROC, Destructive ROC, Basis-funded or Mixed source.
Dividend Coverage: How many times an issuer's earnings cover its preferred dividend. The heaviest IQS pillar for preferreds, scored in bands at 5×, 3×, 2× and 1× coverage, with an uninterrupted-payment-history fallback when coverage is not reported.
DRIP (Dividend Reinvestment Plan): Automatically reinvesting distributions into more shares of the paying issue instead of taking cash. Toggled per holding on YieldDesk; the DRIP Backtest and DRIP Projection calculators show the compounding effect.
Duration: The approximate percentage price change for a one-point move in rates. Perpetual preferreds carry long duration; a one-point rise in rates can take double digits off the price.

E

ETD (Exchange-Traded Debt): See Baby Bond.
Ex-Dividend Date: The date on which the issue first trades without the right to the next dividend. To receive the dividend, shares must be owned before the ex-date.
Expense Ratio: The annual operating cost of an ETF, expressed as a percentage of assets. Subtracted from returns automatically. Lower is better, all else equal.

F

Fee & Hurdle Drag: The yield a BDC investor loses to management and incentive fees. YieldDesk's Fee & Hurdle Drag calculator expresses the combined fee load as percentage points of return given up each year.
Fixed-to-Floating: A coupon structure that pays a fixed rate until a reset date, then switches to a floating rate based on a benchmark (often SOFR plus a spread). Reduces rate risk when rates rise.
Float: The number of shares available for trading: total shares outstanding minus restricted holdings. Used in liquidity calculations like ADV/float.
Floating Rate: A coupon that resets periodically to a benchmark rate plus a fixed spread, today almost always SOFR. The Floating Rate page tracks every floating and fixed-to-floating issue in the universe.
Floor (Rate Floor): The minimum coupon a floating-rate issue can pay regardless of how far the benchmark falls. An issue with a 4% floor keeps paying 4% even if SOFR drops to zero.
Forward Rate Monitor (FRM): YieldDesk's page for SOFR, the Treasury curve and the Fed dot plot, with each fixed-to-floating reset priced off the forward SOFR curve: what an issue is expected to pay at future reset dates if the curve is realized.

H

Hurdle Rate: The return a BDC must earn for shareholders before its manager collects an incentive fee. A 7% hurdle means the first 7% of income accrues fee-free.

I

Incentive Fee: The share of income above the hurdle rate, commonly 17.5% to 20%, paid to a BDC's external manager, on top of the management fee.
Income Quality Score (IQS): YieldDesk’s proprietary 0 to 10 composite score for each issue. A weighted blend of metrics calibrated per asset class: preferreds, BDCs and covered-call ETFs each have their own rule set. IQS is a beta measure, one input among several rather than a settled rating. See the methodology.
Insider Buying: Open-market purchases of an issuer's securities by its own officers and directors, disclosed on SEC Form 4. An alert can fire when insider buying is detected at a watched issuer.
Investment Grade: The upper band of agency credit ratings. Below it an issue is speculative grade, commonly called high yield. YieldDesk shows the classification, not the grade.
IQS Band: The label attached to an IQS score: High Quality at 8 and above, Good from 6.5, Average from 5, Watch below 5.
Issuer: The company that originally issued the security. Bank of America is the issuer of BAC-K.

L

Leverage (Debt / Equity): For BDCs, the ratio of debt to equity. The regulatory cap is 2.0x; most run between 1.0x and 1.25x. Higher leverage amplifies both income and credit losses.

M

Management Fee: The base fee a BDC's external manager charges on assets, typically 1% to 1.75% a year, collected regardless of performance. See also Incentive Fee.
Margin: Borrowing from a broker against a portfolio to buy more securities. The Margin Analyzer calculator tests whether an issue's yield still clears the loan rate after taxes.
Maturity Date: For ETDs (baby bonds), the date the principal is repaid. Most preferred stocks have no maturity and are perpetual.

N

NAV (Net Asset Value): The per-share value of a fund's underlying portfolio, reported daily by ETFs and quarterly by BDCs. Compared to market price to identify premium or discount.
NAV Erosion: A persistent decline in a fund's NAV that occurs when distributions exceed what the strategy actually earns. The NAV Erosion calculator projects the effect on a covered-call ETF position over time.
Net Investment Income (NII): For BDCs, investment income earned minus operating expenses. NII / distribution coverage above 1.0x means the distribution is funded from operating income, not balance-sheet drawdown.
NIIT (Net Investment Income Tax): The 3.8% federal surtax on investment income above the income thresholds ($200,000 single or $250,000 joint). Included in YieldDesk's after-tax income and after-tax YOC math.
Non-Accrual: For BDCs, a portfolio loan that has stopped paying interest. Non-accrual rate (as percent of fair value) is a key credit-quality indicator.
Non-Cumulative: A preferred stock that does not accrue skipped dividends. The issuer can skip a payment and is never required to make it up.

O

Overwrite Percentage: For covered-call ETFs, the share of the underlying portfolio overlaid with short call options. 100% overwrite caps essentially all upside above the strike.

P

Par Value: The face value of an issue, typically $25 for exchange-listed preferreds and baby bonds. Issues are called at par; the coupon is calculated as a percentage of par.
Pay Cycle: The months in which an issue distributes. Common preferred cycles: FMAN (Feb / May / Aug / Nov), MJSD (Mar / Jun / Sep / Dec), JAJO (Jan / Apr / Jul / Oct). Monthly payers, most baby bonds and CC ETFs, distribute every month.
Pay Date: The date the cash dividend or distribution is credited to shareholder accounts.
Perpetual: An issue with no maturity date; it remains outstanding until the issuer chooses to call it. Most preferred stocks are perpetual; all baby bonds have a stated maturity.
PIK Income (Payment-in-Kind): Income accrued and added to principal rather than paid in cash. High PIK as a share of total BDC income can mask coverage stress.
Plan (Starter / Plus / Elite): YieldDesk’s three subscription plans. Starter is free; Plus opens the full desk; Elite removes the limits and adds the mobile app.
Pre-Listing: A newly filed issue that YieldDesk has detected in SEC filings before it begins trading on an exchange. Surfaced on the New Issues page.
Preferred Stock: An equity security that sits above common stock in the capital structure and pays a fixed dividend. Behaves more like a bond than a stock: fixed coupon, no voting rights, often callable.
Premium: A market price above par value. A higher premium means more call risk if the issuer can refinance below the coupon.
Price-to-NAV: A BDC's share price divided by its net asset value per share. Below 1.0 the market prices the portfolio at a discount to book; sustained deep discounts often signal credit concern.

Q

QDI (Qualified Dividend Income): Dividends taxed at the long-term capital gains rate rather than ordinary income. Most U.S. preferred dividends qualify if holding-period rules are met; ETD interest does not.

R

Rate Shock: A scenario that applies an instant parallel shift to interest rates. The Rate-Shock Impact calculator estimates the resulting price change for an issue from its duration and convexity.
Reset Date: For fixed-to-floating coupons, the date the rate switches from fixed to floating.
Reset Spread: The fixed markup over the benchmark that a floating coupon pays after reset. An issue quoted at SOFR + 385 pays the prevailing SOFR rate plus 3.85 percentage points.
Return of Capital (ROC): The share of a distribution that is not characterized as earnings for tax purposes. It lowers the holder’s cost basis, and the tax comes due when the shares are sold. Whether it signals trouble depends on what happened to the fund’s assets; see the constructive versus destructive entry.
Return of Capital, Constructive versus Destructive: The tax label alone settles nothing. Constructive ROC is a tax outcome: Section 1256 index option funds can characterize distributions as return of capital while the portfolio compounds. Destructive ROC is a fund paying distributions while its asset base shrinks; the payout is the holder’s own capital coming back. The pairing of ROC share with one-year total return is what separates the two.

S

Senior Secured: Debt backed by collateral and ranked first for repayment. The share of a BDC's portfolio in senior secured (first-lien) loans is a portfolio-quality factor in its IQS.
Series: A specific preferred-stock issuance from an issuer. Bank of America’s preferreds come in many series, E, K, L and M among them, each with different terms.
SOFR (Secured Overnight Financing Rate): The benchmark that replaced LIBOR for most floating-rate U.S. dollar coupons. Floating coupons are typically quoted as SOFR + a spread.
Strike OTM: For covered-call ETFs, how far out-of-the-money the written calls are struck. Further out of the money means more upside cushion before the strike is hit; closer means more premium collected up front.
Suspension: When an issuer skips a scheduled dividend. Cumulative preferreds accrue the missed payments; non-cumulative preferreds lose them permanently.

T

Tax-Equivalent Yield: The pre-tax yield a fully taxable holding must pay to match a tax-advantaged one after tax. Lets a muni, a QDI-eligible preferred, and a taxable baby bond be compared on one line.
Ten-Year Treasury (10-Y): The benchmark U.S. government bond yield. The reference rate for the income market; Market Trends measures the universe's average yield as a spread over the 10-Y.
Tolerance Band (Alerts): An optional widening of a price alert: fire within a chosen percentage of the target (up to 10%) instead of only at the exact price. A $24.50 target with a 5% band triggers from $23.28.
TTM Yield (Trailing Twelve Months): The sum of a fund's distributions over the past twelve months divided by its current price. Backward-looking by design; a recent distribution cut takes months to fully register.

U

Unrealized Gain / Loss: The difference between a position's current market value and its cost basis while the position is still open. Becomes realized, and taxable, only when sold.

W

Watchlist: A member-defined list of securities for tracking: one on Starter, ten on Plus, unlimited on Elite. The Income Calendar and other tools can filter to a selected list.

Y

Yield on Cost (YoC): Annual income divided by original cost basis. What a position yields relative to what was paid for it, useful for income investors who plan to hold to call or maturity.
Yield Spread: The gap between a yield and its benchmark, quoted in basis points. Market Trends leads with the universe's average yield spread over the 10-Year Treasury: the compensation for taking income-market risk.
Yield to Call (YTC): Total return if the issue is called at the next call date: current yield combined with any capital gain or loss between the current price and the call price. The relevant yield for issues trading above par.
Yield to Maturity (YTM): Total return if a baby bond is held to its maturity date and repaid at par: coupon income plus the pull to par from today's price. The companion number to YTC for issues with a stated maturity.

A missing term, or a definition that could be sharper: email info@yielddesk.co. The page is updated as readers ask.