Stuck Dividends: The Sequel


Stuck Divs Sequel
Due to the number of queries generated by the earlier post, here’s a compilation of answers:

Stuck2

1. Stock Dividend vs. Stock Split: To a current shareholder, not much difference really. Value does not change but board lot concerns will be present. Madami ka ngang shares eh kung maging odd-lot naman? :p To a prospective investor, a stock dividend or split MAY make it more affordable. :)

EXAMPLE

DMC’s 400% stock div. If you have 10 shares today, you can sell it all. (Closed at 76). Now, after you receive the dividend, you will hold 50 shares and if the previous close is still 76 pesos, each of your shares will now be worth…… 15.20 pesos. With a board lot of 100, odd-lot na ang buong holdings mo. Hence, make sure you have at least 20 (and multiples thereof) shares of DMC para board lot pa din after.

2. A stock dividend WILL result in a downward price adjustment.

3. Stock dividends give larger holders more flexibility kasi nga nababarya holdings nila. An EXTREME example of this would be Buffett’s Berkshire Hathaway that sells for almost $ 200,000 PER share. So if you just had one share, all or nothing ka but if they gave a stock dividend, mababarya hawak mo and you can sell portions of it.

4. Stock dividends (in my opinion) will never be better than a cash dividend since it requires the price to go up for the dividend to actually have any value. Cash dividend gives you value immediately.

5. Long-term investors are more vulnerable to getting odd-lots kaya hindi talaga ok ito para sa kanila. And once you get an odd-lot, ang hirap talaga makabuo ulit. Mahirap pero hindi impossible.

Feel free to comment and share.

Aya Laraya

public seminarofw


Comments

  1. ernez says

    tnx sir aya .blak k sn ibenta ang ibng shares k kht neg gain. kc 4tmes kta s dmc .kso lugi p ko kht mkreciv ng div.
    nx wk sn mgbuy me .tnx for the xplanation.

  2. geishah anne marie says

    Sir Aya panu po kinocompute ung 400% stock divs.like ung example ng dmc na from 76 tas now is 14 na lang? Thank you po :-)

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