Comparison with stock
A bond differs from a share of stock in several ways:
- A bond is a debt or liability of the issuer, while a share of stock is a unit of ownership.
- A bond has a maturity date when it must be paid. A share of stock does not mature; stock remains
outstanding indefinitely unless the company decides to retire it.
- Most bonds require stated periodic interest payments by the company. In contrast, dividends to
stockholders are payable only when declared; even preferred dividends need not be paid in a particular period
if the board of directors so decides.
- Bond interest is deductible by the issuer in computing both net income and taxable income, while dividends
are not deductible in either computation.