LIQUOR STORES NA LTD 4.70 PCT DEBS T.LIQ.DB.B

RE:RE:RE:RE:RE:Capex

[Goldbuggy1]

Goldbuggy1 wrote:

DoubleOhDiv wrote: This is not how the dividend behaves on a stock split or reverse stock split. 

If you do a 2 for 1 stock split then the div/share is cut in half and the dividend percentage remains exactly the same. 

If you do a 1 for 2 reverse then the div/share is doubled, and again, the dividend percentage remains exactly the same. 

Case in point, I bought SBUX pre-split. 
The percentage dividend I received before the split and after the split are exactly the same.
Each share gives have the div now but I now own double the shares.

What mercatos is saying is to do a 2 for 1 stock split which would cut the per share div in half without affecting the overall dividend payout. 

Okay! Let's break this down into numbers that are easier to see. The Company pays $1.08 per share for a Dividend. This is the Constant here! No matter what happens the company has agreed to pay $1.08 per share. Right now the company has about 27.5M Shares Outstanding and the Share Price is $7.16. So the Dividend Yield would be $1.08 / 7.16 = 15.1% which it is right now. This Yield chances as the stock goes up or down as the Constant is $1.08 per share. On 2-for-1 Stock Split 3 things will happen. Every Shareholder will be given an addition share for every share they hold. As a result the Outstanding Shares double from 27.5M to 55M. Since no value was added to the company by this Stock Split then it stands to reason that with now double the shares the price would be cut in half, and now only $3.58 (i.e. $3.58 x 55M = $196.9M...$7.16 x 27.5M = $196.9M) So that is the second thing that happens. Since the Constant was paying $1.08 per share no matter what, you can see that they are now paying twice as much in Dividends as you now have twice as many shares. The third thing that happens is the Dividend Yield chances as the Share Price changed but not the Constant $1.08 per share. So your new Yield is $1.08 / $3.58 = 30%. So knowing this now it then stands to reason that if you do a Reverse-split, and a Shareholder only gets 1 share for ever 2 shares he holds, you end up with half as many shares at double price. With half the shares paid at $1.08 per share you end up only paying half as much on Dividends. The Yield would also get cut in half as the Share Price Doubled. No?https://www.investopedia.com/ask/answers/113.asp

I should add that it is not to say that companies who do a Split or Reverse-split, don't make adjustment to there Dividend Payment to reflect these changes, as they usually do. But they don't have to. In Corporate Bonds or Debentures, the Yields generally stay the same and the Bond Price goes up and down depending on Market conditions. With a Dividend the Dividend Yield is constantly changing as the stock price goes up and down.