does the amount of dividend go down in proportion to the stock price? if i was getting 40 cents on a 40 dollar share of stock, would i get less than 20 cents on a stock split?
2006-07-24 16:57:36 · 8 answers · asked by Anonymous in Business & Finance ➔ Investing
There is not a set rule when it comes to dividends - sometimes they will cut them when there is a stock split... sometimes not. Different theories are around when it comes to dividends. Sometimes when a company pays out a lot in dividends, it sends a signal to the investor that the company is not going to be growing much in the future. The company has no "great" investing idea so they might as well give the income back to
the investor. Sorta like Microsoft not paying any dividends for many years - they had a better use of the money and their stock price climbed greatly. This theory changed slightly a few years ago when Bush changed the tax law concerning dividends. Most dividends now go to the investor tax free so there has been a big push from investors to demand more dividends. So Microsoft started paying dividends and their stock price has suffered.
2006-07-26 17:50:18 · answer #1 · answered by mviking1 2 · 0⤊ 0⤋
There aren't really any big disadvantages to a stock split. Companies usually split when they feel the market price is getting too high for enough investors to buy it. When they split, the stock price drops, which makes it more affordable.
As far as the company books go, the value of the stock drops in proportion to the split. So if your dividend was $1 and the stock were to split 2 for 1, your new dividend would be 1/2 the original or $0.50.
2006-07-25 16:58:18 · answer #2 · answered by msoexpert 6 · 0⤊ 0⤋
A stock split is a non-event financially for a company. The company net value doesn't change at the split. The reason it is done is to make the price for a round lot of shares (100's) reasonable. Having 100 shares cost a reasonable amount helps the small investor/trader. This opens up options trading since each option equates to 100 shares of stock.
2006-07-25 01:32:29 · answer #3 · answered by Father Knows Best 3 · 0⤊ 0⤋
Typically, a split in a stock will result in the dividend being split. So your example will most likely be correct.
However, the dividend is set by the board. There is nothing that says that the divident has to change. They could suspend the dividend all together, or keep it the same as it was before the split.
2006-07-24 17:02:30 · answer #4 · answered by Slider728 6 · 0⤊ 0⤋
it can be damaging sometimes. Company's will split to make there price more appealing to investors but it can also backfire when there are too many share holders. The stock can become over valued and can cause a rapid volume in selling activity. This of coarse causes the price to go down. Its not usually bad but I would say 25% of the time it means the company knows there close the the end of there glory days.
2006-07-24 18:38:41 · answer #5 · answered by dkwr14 3 · 0⤊ 0⤋
Stock splits mean nothing. Your share # goes up. The dividend (if many other factors are the same from before the split) will reflect the split;
Ie;
50 shares @ $20 = $1,000 with dividend of .80 each share
100 shares @ $10 = $1,000 with dividend of .40 each share
2006-07-25 00:25:42 · answer #6 · answered by Common Sense 7 · 0⤊ 0⤋
If it splits 2 for 1, you would get 20 cents.
2006-07-24 17:03:08 · answer #7 · answered by fcas80 7 · 0⤊ 0⤋
On a split, you get more shares that are each worth less. As long as the price goes back up and you weren't planning on selling, it is a good deal.
2006-07-24 17:02:42 · answer #8 · answered by therego2 5 · 0⤊ 0⤋