“Dream big, and start with small actions” . Many investors starting to participate in the market ask the same question, when the company pays dividends, will I receive it? or is it beneficial to be rewarded with shares?
To answer the above question, Khainguyen Investment would like to present as follows:
1. What is a dividend?
Dividend is a part of profit after tax distributed to the shareholders of a joint stock company. Dividends can be paid in cash or in shares. Dividends will be calculated according to the par value of the stock, not the market price of that share on the closing date of the list of shareholders.
The company makes payments (money, or shares) to its shareholders. Usually this actual settlement occurs a few weeks after the cut-off date.
2. Stock dividends
In essence, a stock dividend (or stock bonus) is a stock split and it does not generate any new cash flows to help the enterprise (DN) increase its internal strength. me.
Therefore, when the company pays a stock dividend, the amount of equity does not change. In other words, when the company pays a stock dividend, the company does not does not create any additional material value for shareholders, but in fact is just a reciprocal increase and decrease in the books between items.
Note when investors receive dividends in shares:
Investors have more shares, but the price of each share has been diluted when separating shares, so investors’ assets remain completely unchanged, neither increase nor decrease.
Dividing stock dividends helps enterprises increase their charter capital. But in essence, there is not any new cash flow flowing into the business. Therefore, at first glance it looks like a bigger business, but it’s really just a bookkeeping business.
⇒ Paying stock dividends helps to increase the number of outstanding shares, thereby indirectly increasing the liquidity of that stock.
In a bull market (bull market), the common stock dividend policy is many businesses and even preferred shareholders. When the stock price is increasing strongly, the dilution helps the market price to decrease, creating a positive sentiment in the short term for investors who need to disburse. In addition, investors also expect the subsequent growth in stock prices to yield a larger return than cash.
Viewing: What is a dividend?
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On the contrary, in a bear market, especially in a gloomy market period, stock dividend will cause negative sentiment. for investors because stock dilution makes the feeling of stock price decline worse, investors also feel more secure when holding cash.
3. Effects of cash and stock dividends
Usually, large-scale enterprises with stable operation for many years often choose the form of cash dividend.
Satisfy shareholders who want to receive cash. Enterprises will increase their capital scale quite slowly, which may be surpassed by competitors in a fiercely competitive environment.
However, there are many businesses that choose to pay dividends by shares to meet their development investment needs. ⇒ Increase capital for development investment.
If the stock market is sublimating with large demand and high share prices, the share division will help shareholders achieve a higher value than receiving cash.
4. Exempt transaction date, payment date, last registration date?
a, Ex-right date?
Ex-rights date is the transaction date on which the buyer will NOT enjoy relevant rights (right to receive dividends, right to purchase additional shares, right to attend the meeting of shareholders…)
b, Payment Date?
c, Last registration date?
Last registration date also known as closing date of list: Is the date the issuer makes a list of securities owners for the purpose of exercising rights for shareholders. At the closing date of the list, if the investor is on the list of securities owners, they will receive their rights such as the right to receive dividends, the right to buy additional shares…
Bonus stock is a stock that is distributed according to dividends. Bonus shares are not considered an actual dividend because they are not paid out in cash. Stock bonus A transaction that increases the number of shares, not the value of the equity.
Bonus shares contribute to increase charter capital, improve financial capacity and have the opportunity to access larger loans for business development. In addition, it also helps shareholders not to pay personal income tax.
This, however, dilutes the stock, reducing the value per share as the number of shares outstanding increases. Capital surplus, Retained profit, and EPS decrease in proportion. Enterprise value remains the same.
Here are some examples for you to understand!
Example: The company has 2 million shares, par value 20,000 VND/share. What does the company issue shares at the ratio 2:1, 5:1 at the price of 20,000 VND?
The ratio 2:1 means that shareholders holding 2 old shares will receive 1 new share, then the total number of new shares of the company is 3 million shares, par value 13,333 VND/share votes.
The ratio 5:1 means that shareholders holding 5 old shares will receive 1 new share, then the total number of new shares of the company is 2.4 million shares, par value 16,667 /shares.
<3 After the division and issuance is completed, to what extent will the price of CP XX be diluted?
P’ = <30000+(12000*20%)-1800> / (1+20%+12%)= VND 23,182/share
We recommend that you find an experienced and knowledgeable consultant to accompany your investment process, to get better advice and achieve the desired effect. wait in investment. Please refer to the consulting services of Khainguyen Investment to understand more about the market and invest more successfully.
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