About Widow- And- Orphan Stocks --

Widow-and-orphan stock is relatively low-risk stock from well-known firms that pay high dividends. Widow-and-Orphan stocks are generally chosen during bear markets and ignored during bull markets. This is because these companies are perceived to be able to maintain their dividend payment schedule through difficult financial times. A widow-and-orphan stock is a conservative investment with limited possibility for large gains or losses. In brief it is a stock characterized by smaller than average price movements, a relatively high dividend, and little likelihood of dividend reduction or serious financial problems.

In the past, Widow-and-orphan stocks were considered to be among the most desirable of stockoptions . Some widow and orphan offerings were associated with companies that held a monopoly in a given industry. Utilities were/are often referred to as widow-and-orphan stocks because of their monopoly and dividend yield.

A Widow-and-orphan-stock was the blue chip stock of its day. Banks were excluded from this class as the result of their involvement in the bubble and crash of 1929. It was not until several years after the government-instituted regulations like the Glass-Steagall Act, which separated investment banking and "regular" commercial banking, that "widows and orphans" was again applied to commercial banks.

The term is noteworthy because it was generally used during market bottoms, but today it means something different.Stocks that were once viewed as a safe haven for very risk-averse investors changed .The reason may be because of the change in company's business strategy or the change in the market trends.

It is time to redefine the terms "widows" and "orphans"in this regards. Individual investors have been "widowed" by Wall Street, which, by following only big-cap, highly liquid stocks, has shifted its focus to serving the needs of institutional investors. "Orphan" stocks now are small-cap stocks (under $500 million in market capitalization) that have been abandoned by Wall Street. These widowed investors and orphaned stocks can be reunited, but it will require new ways of thinking by both the parties. Investors must realize that they need to take more responsibility in doing their own before taking investment decisions. In addition, the executives of orphaned stocks must take the initiative to get their information to the market of widows.