When investors buy into a corporation or buy the shares of the company, they will receive stock certificates in their names, stating the number of shares and the type of stock they own. The certificate guarantees the right to a dividend, if one is declared.

What is the primary difference between dividends and coupons?
Coupons are guaranteed, dividends may or may not be paid 
 

A company's stock, by definition, does not have any defined maturity or fixed coupon. Hence, measurements used to determine returns on debt instruments are unsuitable for determining return on equities. There exist certain financial ratios, which are often calculated to assess the value of an equity holding and they include the dividend yield, the price/earnings (P/E) ratio and the price/book (P/B) value ratio. These standardised ratios or fundamentals allow an investor to make comparisons of equity investments within any single industry – fundamental analysis
 

Example: 
If DBS stock is trading at $25.00 per share and pays an annual dividend of $1.00, the dividend yield is 

Dividend Yield	=	Expected Dividend Amount           Stock Price
	=	$1.00/$25.00
	=	0.04 or 4 %

The P/E ratio represents the relationship between the price of one share of company stock and the annual earnings per share of the company. It is a useful measure because it expresses a company's value in terms of its earnings, rather than the stock price, facilitating company-to-company comparisons.

Example: 
If DBS stock is trading at $25.00 per share and earnings per share for the last fiscal year were $1.00, the P/E ratio is 

P/E Ratio	=	Stock Price  Earnings per Share
	=	$25.00 $1.00
	=	25.00

The P/B ratio is the ratio of the stock price relative to the book value per share of a company, or the value of each share if the company were liquidated. It represents the market expectation of the value of the company versus its net worth on paper. 

Example: 
If DBS stock is trading at $25.00 per share and the book value per share is $18.00, the P/B ratio is:

P/B Ratio	=	Stock Price  Book Value per Share
	=	$25.00 $18.00
	=	1.3889

 A P/B ratio of 1.3889 implies that DBS is worth 38.89% more than its liquidation value.
 

A convertible bond (CB) is a corporate bond that acts as a vehicle for holders to convert it into a specific amount of common stock in the issuing company. A conversion ratio refers to the number of shares the CB holder will receive upon conversion.
The conversion price is the price at which the CB can be converted into a predetermined number of shares of the stock when the conversion is exercised.
If the price of the issuing company's stock rises, the CB holder can convert the bond to stock to take advantage of the price increase. On the other hand, if the stock price drops, the CB continues to pay the holder the regular interest, providing the downside protection offered by a bond (no conversion).

Example:
An investor pays $1,000.00 for a 5% DBS convertible bond that matures in 10 years' time. This bond may be converted into 24 shares of DBS stock at any time up to maturity. At the time of purchase, DBS stock is trading at $25.00 per share. It rises to $30.00 the first year, and to $40.00 the second year. The investor collects $50.00 in coupon payments for each of these 2 years. In three years, the DBS stock is worth $50.00 a share. The investor converts the $1,000.00 CB into 24 shares of DBS stock and sells it in the market for $1,200.00. His profit is $200.00 ($1,200 - $1,000).
 

7.1 Warrants
Warrants are certificates that entitle the holders of the warrant the right to purchase a specified number of shares of a stock at a specific price, either at a specified date or at any time in the future. They are initially priced at a subscription above that of the underlying stock, making immediate exercise unprofitable.
Warrants are also often linked to low coupon bonds (a cum-warrant), whose objective is to lower the cost of debt and/or make an issue more attractive. In the case of a cum-warrant, if the warrant is exercised, the low coupon bond continues to pay interest till maturity. The low coupon bond is known as an ex-warrant.
Warrants in fact are more complex than meets the eye. They are similar to call options, in that they guarantee holders the right to purchase a specified number of shares of a stock at the specific price. To value a warrant properly, investors must determine its conversion price and number of exercisable shares. In addition, its parity, warrant premium and gearing must also be considered.

Example:
Consider the following warrant:
Warrant Price = 60.00%
Exercise Price = $25.00
Conversion Ratio = 100.00%
Face Value = $100.00
Stock Price = $35.00
 

Hence, each warrant will buy 4 shares. As long as the price of the stock exceeds $160.00/4, or $40, conversion is profitable.
 

A parity of 40.00% implies the theoretical value is 40.00% or 20% lower than the market price of the warrant. If the warrant were exercised immediately, there would be no profit. 
 

The warrant is 14.28% more expensive than its theoretical value.