Cash Dividend vs Share Bonus

New to buying shares? Have a question you're afraid to ask? Ask here about PEs and EPSs and PBVs...

Cash Dividend vs Share Bonus

Postby sam111sam » Wed 21 Mar 2012 14:19

Theoretically, there is no difference between the company paying cash or adding the profit to the capital to expand the business and hence issuing new additional shares to be distributed to the current share holders

But you could how much the local market welcomes cash dividend Vs share dividend... Like today's example of DIC. The price has actually jumped more than the total value of the cash dividend. Isn't this amazing.

Why are the UAE investor so eager to get cash rather than share dividend ?

Simply because they don't trust the book profits..or the management. This is my view.

this shows to what extent the confidence is lost. In any mature market anywhere in the world it would makes no difference wether you get cash or share dividend
Even in UAE it did not make that much of a difference till 2008... But, Now it is a different story !
sam111sam
entrepreneur
entrepreneur
 
Posts: 3666
Joined: Sat 15 Mar 2008 10:54

Re: Cash Dividend Vs Share Dividend

Postby Tarish » Wed 21 Mar 2012 14:27

sam111sam wrote:Theoretically, there is no difference between the company paying cash or adding the profit to the capital ...


In the tax based countries its matter thats why it reflects positive or negative, but in UAE its tax free so its the same if you calculate it. In the tax based country if they get a cash dividents they have to pay tax, so they prefer share dividents.
In my opinoin we cant compare UAE with develop or any tax based country when it comes to dividents.
Tarish
opportunist
opportunist
 
Posts: 35
Joined: Sat 12 Nov 2011 19:16
Location: Dubai, Jumeira

Re: Cash Dividend Vs Share Dividend

Postby mubinalhaddad » Wed 21 Mar 2012 17:08

sam111sam wrote:Theoretically, there is no difference between the company paying cash or adding the profit to the capital ...


Hi Sam,

Firstly let me say i have huge respect for you and your opinions. This is my first post (It felt only right to start posting after reading all since january, and who better to begin writing to than you)

Correct me if I'm wrong but I believe getting share dividends is better than cash. Lets take an example:

Say hypothetically speaking one has 3000 shares of Emaar and say the share price is AED 3/= Now there is a 10% cash dividend which would give one AED 300/= but if I had 10% shares divs that is 300 shares and selling that @3/= would give me (300 x 3)-75 = 825/=

Did I get something wrong here? I'm new to trading or rather not a very active trader. I am here to learn from such wise men :)
mubinalhaddad
opportunist
opportunist
 
Posts: 25
Joined: Wed 21 Mar 2012 15:03

Mathematics...

Postby wisk » Wed 21 Mar 2012 18:14

Dear Mubin...

Your calculations are correct... but fortunately or un fortunately it falls correct for both cash and share dividend...

The matter is not the comparison of both... the matter is pschycological more in UAE rather than theroatical or mathematical...

First of all in UAE, after the dividend record date the price of share drops to adjust the dividend paid... i.e in your case as U calculated, EMAAR would have share price 2.7 - 2.8 the next days after paying 10% whether cash or share.

But...

Post 2008 people are scared of companies abilities, capabilities, responsibilities, realities, transparencies and conspiracies :-) that they dont believe in a company who issue share dividend in the name sake of further investments... Hence any Co, pay cash they beleive that this Co, generated a real profit and hence able to continue...

I think am clear in my piont of view...
sMiLeS AcRoSS MiLeS
User avatar
wisk
speculator
speculator
 
Posts: 308
Joined: Thu 01 Jan 2009 21:43

Re: Mathematics...

Postby mubinalhaddad » Wed 21 Mar 2012 18:30

wisk wrote:First of all in UAE, after the dividend record date the price of share drops to adjust the dividend paid... i.e in your case as U calculated, EMAAR would have share price 2.9 the next days after paying 10% whether cash or share...


Dear Wisk,

Thanks for your response. But I still feel share dividends are better than cash, or should we agree to say in some cases like EMAAR? because from what I gather you're saying the price of the shares usually fall so close to the same amount equivalent of cash dividends being paid. Surely for the example of 3000 shares and 300/= cash or 300 shares the share price of EMAAR will not fall to AED1/= by 3rd MAY 2012

Another learning process for me :D
mubinalhaddad
opportunist
opportunist
 
Posts: 25
Joined: Wed 21 Mar 2012 15:03

Re: Mathematics...

Postby sam111sam » Wed 21 Mar 2012 20:20

mubinalhaddad wrote: Surely for the example of 3000 shares and 300/= cash or 300 shares the share price of EMAAR will not fall to AED1/= by 3rd MAY 2012 ...


Thanks for the nice words

Most of the time, 10% shares has a higher value than 10% cash...Except if the stock is trading below face value like UPP or GulfNav... On such shares, you would be better off with cash (if we can ever get cash from these :lol: )

In either case, the market would normally adjust on the following day where you lose much of the value of the new shares or cash that has been paid out.
sam111sam
entrepreneur
entrepreneur
 
Posts: 3666
Joined: Sat 15 Mar 2008 10:54

Re: Cash Dividend Vs Share Dividend

Postby sharewadi » Wed 21 Mar 2012 22:55

mubinalhaddad wrote:Say hypothetically speaking one has 3000 shares of Emaar and say the share price is AED 3/= Now there is a 10% cash dividend which would give one AED 300/= but if I had 10% shares divs that is 300 shares and selling that @3/= would give me (300 x 3)-75 = 825/=

Remember that each share represents a fraction of the company - if you have 3000 shares, then you own 0.00005% of Emaar (approximately, and I'm guessing they still have about 6 bn shares outstanding).

My point is that if bonus shares are issued, then you still own the same proportion of the company because everyone else gets bonus shares also. So if you sell those 300 bonus shares, then you wind up owning a smaller part of Emaar with 3000 shares than you did before the bonus shares were issued.

That's where the extra 525 dhs comes from in your calculation (825 dhs from selling the 300 bonus shares less 300 dhs cash dividend if you'd been issued that instead). By selling 300 shares you've actually reduced the amount of Emaar that you own to a level lower than you had before the shares were issued. But with a cash dividend, your ownership proportion wouldn't change.

Approximately. You could argue that the brokerage fees mean that a cash dividend is actually worth more than a share dividend.

What happens in reality is that after shares go ex-dividend, the stock prices are adjusted amounts to compensate for the share or cash dividend so that in theory, it doesn't make any difference.

In practice, as others have pointed out, there are psychological factors that come into play, and they are not so easy to put into mathematical formulas.

Here are some previous posts with more reading about dividends in the UAE and in general, from the Beginners investment forum :).

Dividend calculation in Dubai
Dividend payments in UAE
Record dates for UAE stocks
Dividend record dates
Dividend payment dates Dubai
UAE stock dividend dates
Effect of dividends
Companies must pay dividends in Dubai?
Different dividend payments in UAE?
Please read forum posting guidelines, especially if you have been deactivated.
User avatar
sharewadi
moderator
 
Posts: 14423
Joined: Fri 19 Aug 2005 11:10
Location: up the wadi without a paddle

Postby burnt_fingers » Wed 21 Mar 2012 23:24

@ sharewadi

Just the post i wz looking for...need to brush up on alotta basics :lol:

@ sam, mubin & wisk

Another point that i wud like to add is with cash and bonus is the present value and future value. Cash realized today definitely hold more value than later. I highlight this becuase sumtimes the tendency of not selling a bonus share is high since its "free" :D As in u dunt pay directly for those shares.

What do u think?!?
burnt_fingers
speculator
speculator
 
Posts: 319
Joined: Wed 22 Feb 2012 15:01

Postby mubinalhaddad » Wed 21 Mar 2012 23:40

burnt_fingers wrote:Another point that i wud like to add is with cash and bonus is the present value and future value. Cash realized today definitely hold more value than later. I highlight this becuase sumtimes the tendency of not selling a bonus share is high since its "free" As in u dunt pay directly for those shares.


Exactly Burnt_fingers... How I see it is taking the "free" shares and giving myself an extra cash dividend rather than the 10% :D

I need to read up on those topics from SW too, but does my point hold water?
mubinalhaddad
opportunist
opportunist
 
Posts: 25
Joined: Wed 21 Mar 2012 15:03

Postby ixtira » Wed 21 Mar 2012 23:49

Technically cash or shares makes no difference as both are from profits and it should make no difference to shareholders since.

Bonus Shares can be sold for cash
Cash can be used to buy shares

For some people it's a matter of physcology. I'm only interested in the amount I don't care how they pay it.
User avatar
ixtira
mercenary
mercenary
 
Posts: 600
Joined: Mon 11 May 2009 13:59

Postby burnt_fingers » Wed 21 Mar 2012 23:49

@ mubin

I would say ur point depends on what u wana do with those shares i.e hold them or liquidate them. I have had many bonus shares and kept thm irrespectiv of what prices they are n the approach is to trade tge "bought" shares.

As it is i m chicken to sell ! :oops: :lol:
burnt_fingers
speculator
speculator
 
Posts: 319
Joined: Wed 22 Feb 2012 15:01

Postby sharewadi » Thu 22 Mar 2012 00:05

mubinalhaddad wrote:How I see it is taking the "free" shares and giving myself an extra cash dividend rather than the 10%

They're not "free" as in you're getting something for nothing. It's just the company shifting money or assets around.

When bonus shares are issued, share capital goes up, but assets goes down by the same amount, so the total value of the company is unchanged.

Think about it this way.

I own Sharewadi, which is worth AED 500 (assets less liabilities), and has 100 shares outstanding (par value AED 1), so you could say each share is worth AED 5. Sharewadi issues a 25% share bonus, or 25 shares, so now the total number of shares outstanding is 125. But the company is still worth AED 500. So each share is now worth AED 4.

For the sake of argument, we'll say that the stock exchange has SW shares listed at AED 5 before dividend date, then the price will adjust to AED 4 ex-dividend.

I sell my 25 bonus shares at AED 4 each, and get AED 100. I still have 100 shares but they are only worth AED 400 now. The company is still worth AED 500 but someone else has the other 25 shares because I sold them.

If, instead of a share bonus, SW issues a 25% cash dividend, that means 25 fils per share because par value is AED 1.

So, I get 100 shares x 25 fils per share = AED 25. I still have 100 shares, but after the company issues the cash dividend, it is worth AED 500 - AED 25 dividend payment = AED 475. So each share is worth AED 4.75 now, and the market usually adjusts to reflect this (but not always).

But as for my own personal finances, here's how it looks:

Pre-dividend: 100 shares worth AED 5 each = AED 500.

Post-cash dividend: 100 shares worth AED 4.75 each + 25% cash dividend = AED 475 + AED 25 = AED 500.
Post-share dividend (selling 25% bonus shares): 100 shares worth AED 4 each + cash proceeds from selling 25 shares at AED 4 each = AED 400 + AED 100 = AED 500.

Yes, I've ignored broker fees just to simplify things.

As for what happens tomorrow, or next week, or next month, etc ... nobody knows. If share prices go up then it's good to keep the bonus shares. If share prices go down then we'll wish we'd sold them.

Hmmmm. I'm not sure that's very clear after all. Maybe it's past my bedtime ...
Please read forum posting guidelines, especially if you have been deactivated.
User avatar
sharewadi
moderator
 
Posts: 14423
Joined: Fri 19 Aug 2005 11:10
Location: up the wadi without a paddle

Postby burnt_fingers » Thu 22 Mar 2012 00:11

@ sharewadi

Nope, its very very clear. I just hope u dunt have dreams about emaar flying over amlak or reminding posters about forum guidelines :D

Offlate uv been made to remind those alot. :lol:
burnt_fingers
speculator
speculator
 
Posts: 319
Joined: Wed 22 Feb 2012 15:01

Postby mubinalhaddad » Thu 22 Mar 2012 05:23

sharewadi wrote:I own Sharewadi, which is worth AED 500 (assets less liabilities), and has 100 shares outstanding (par ...


Dear SW,

You have explained very well. thanks i understand this clearly and learnt something new as well about price adjustment. thanks a lot
mubinalhaddad
opportunist
opportunist
 
Posts: 25
Joined: Wed 21 Mar 2012 15:03

Worth of Company and Bonus

Postby wisk » Thu 22 Mar 2012 20:34

I have little dis agreement with SW on your explanation of cash vs share.

As I said earlier, by all technical, mathematical and logical ways, both share and cash dividend are same...

The Dividends / Bonus (whether shares or cash) is never ever from the original capital, it is the extra money which a company has / had earned during a fiscal year and thus shares the profit with its stake holders.

Given above, dividends are profits which are distributed according to strategical percentage (which varies sector to sector and company to company).

The Only advantage any Co which issue shares instead of Cash is that they retain the cash for thier immediate / planned use.

The total Worth of Company remains same by all cases.

As SW used SW Co for example. Let us take the same. SW Company has 100 outstanding shares and is worth 500 Dh worth (AED 5 / share) and this will remain same in all cases.

So, if U issue a cash dividend of 25% (i.e. 1.25 Dhs / share = 125 AED) the assets of the Co remains same i.e. 500 AED.

Now if you retain this 25% i.e. 125 AED, and used it to buy anther blog site (say Dubaisharetalk) worth about 125 AED. The Company worth becomes 625 AED (i.e. AED 5 / share) with total out standing shares of 125.

I think I made my point, and if wrong please advise...
sMiLeS AcRoSS MiLeS
User avatar
wisk
speculator
speculator
 
Posts: 308
Joined: Thu 01 Jan 2009 21:43

Postby Sher » Thu 22 Mar 2012 23:01

Wisk wrote: "So, if U issue a cash dividend of 25% (i.e. 1.25 Dhs / share = 125 AED) the assets of the Co remains same i.e. 500 AED"


Hey Wisk,

With all respect to your knowledge, I would like to point out what went wrong in the above statement.

1. Before the announcement of profit, SW company was worth AED 500.

2. Even after the announcement of profit the SW company is worth the same which is AED 500.

3. If SW company decides not to distribute the profit, sitll the company is worth AED 500.

4. If the company decides to distribute its profit the company is still worth AED 500.

5. Once the company distributes the profit the company is only worth AED 375 since AED 125 is now in the pocket of the shareholders.

6. If the AED 125 was used to buy another blog site (say Dubaisharetalk) worth about 125 AED, then still the total worth is 375+125=500 and not AED 625.

So Mr. Sharewadi's explanation was correct.


Another point : There is no fixed value called "original capital" it is only an initial investment and over a period the asset value can change into bigger value or smaller value depending on profits generated. Also profits generated is always part of the company's worth, so it cannot be considered something extra. The moment the profit moves out of the company's account to the shareholder's pocket, the Company is worth less - consequently the share price on the stock market is adjusted. Later on sentiments can pull or push it to any direction.

Does this sound logical ?
User avatar
Sher
profiteer
profiteer
 
Posts: 85
Joined: Thu 13 Dec 2007 20:36

Re: Worth of Company and Bonus

Postby sam111sam » Fri 23 Mar 2012 10:01

wisk wrote:The total Worth of Company remains same by all cases. ...


Once the cash is paid out, the book value drops...

One more diff... DFM adjust the opening price downwards after the share dividend is paid...but not after cash. most od the charting software also do the same..

This may look like a trivial issue, but it has big impact on the technical charts

For example, yesterday DFM Index closed positive yesterday just because CBD maintained the same closing price of Wed, while (3.0) DFM has adjusted the opening price to 2.75. This action added 4-5 points to the index.
sam111sam
entrepreneur
entrepreneur
 
Posts: 3666
Joined: Sat 15 Mar 2008 10:54

Ex-dividend record dates

Postby nilegirl » Fri 23 Mar 2012 10:58

How do we find information regarding the Ex dividend record dates for stocks?

Thanks
nilegirl
charletan
charletan
 
Posts: 17
Joined: Sun 11 Apr 2010 14:38

Re: Worth of Company and Bonus

Postby Sikandar » Fri 23 Mar 2012 14:01

sam111sam wrote: CBD maintained the same closing price of Wed, while (3.0) DFM has adjusted the opening price to 2.75. ...


Dear Sam,

I didnot understand how did Cbd maintain its opening price of 2.75.
As it has never touched that price level. Everywhere i saw the opening price it says is Dhs 3 on thursday with that one trade of 50,000 shares. Did i miss anything..?

I very well understand and have noticed many times The Dfm Index being supported by heavy stocks like CBD, Mashreq, Emirates Nbd etc..

Please, would you clarify the opening price of CBD. I have never seen it trading below 2.80.
Sikandar
opportunist
opportunist
 
Posts: 26
Joined: Sun 17 Apr 2011 20:56

Re: Worth of Company and Bonus

Postby sharewadi » Fri 23 Mar 2012 16:19

I pretty much agree with what Sher said. Some other points ...

wisk wrote:The Dividends / Bonus (whether shares or cash) is never ever from the original capital, it is the extra money which a company has / had earned during a fiscal year and thus shares the profit with its stake holders.

True, but if bonus shares are issued, then Share Capital increases (and Total Assets decreases by the same amount).

I think Net Profit shifts to the Shareholders' Equity part of the Balance Sheet as Retained Earnings (after deduction of Cash Dividend).

Anyway, that's just shifting numbers around. The SW value of AED 500 is easier to deal with if it is assumed that Net Profit (or Loss) was already included. But if not, it doesn't matter, just adjust all subsequent calculations by the amount of profit or loss and the final result will be the same.

wisk wrote:The Only advantage any Co which issue shares instead of Cash is that they retain the cash for thier immediate / planned use.

True, and a number of companies have a policy of not issuing cash dividends on the basis that they know better how to invest money than their shareholders do. That might be seen as somewhat arrogant but then again why would an investor give their money to a company in the first place if they didn't think the company knew what they were doing?

However, I understood the question to be about the financial difference to a shareholder of cash vs share dividends at the time of distribution or announcement.

wisk wrote:The total Worth of Company remains same by all cases.

I disagree. If the company gives away cash, its value has decreased by that amount. If the company gives away shares, it's not giving away anything, it's just diluting the value per share. But there is a psychological effect on shareholders of thinking that they now own more of the company because they have more shares (they do have more shares, but they don't own a greater share of the company).

wisk wrote:So, if U issue a cash dividend of 25% (i.e. 1.25 Dhs / share = 125 AED) the assets of the Co remains same i.e. 500 AED.

Erm, if cash dividend is 25%, then that's AED 0.25 per share, not AED 1.25 per share.

wisk wrote:Now if you retain this 25% i.e. 125 AED, and used it to buy anther blog site (say Dubaisharetalk) worth about 125 AED. The Company worth becomes 625 AED (i.e. AED 5 / share) with total out standing shares of 125.

So this calculation becomes AED 25 used for purchase of DST (what a bargain :)!) and company value remains at AED 500 (500 less 25 cash dividend + 25 value of DST).

But whether the dividend amount is 25 or 125 doesn't make a difference in your example since the calculation will always be Total value = 500 - dividend amount + purchase price of DST.

How's our disagreement looking now :)?
Please read forum posting guidelines, especially if you have been deactivated.
User avatar
sharewadi
moderator
 
Posts: 14423
Joined: Fri 19 Aug 2005 11:10
Location: up the wadi without a paddle

Re: Worth of Company and Bonus

Postby sam111sam » Fri 23 Mar 2012 19:12

Sikandar wrote:As it has never touched that price level. Everywhere i saw the opening price it says is Dhs 3 on thursday ...


Yes, you are correct: it closed on Wed at 3.0 and had only one trade on Thursday at 3.0. Did not trade below 3 for the past one month.

Yet if you look at DFM Market Watch NOW
http://www.dfm.ae/Option3/default.aspx?t=N
You will see that the opening price is 2.75 (rather than 3) and it is showing 5% up. This big 5% up of a heavy weight like CBD has added aprox 5 "fake" point to the index
sam111sam
entrepreneur
entrepreneur
 
Posts: 3666
Joined: Sat 15 Mar 2008 10:54

Postby Sikandar » Fri 23 Mar 2012 20:53

Yes, very True. The closing price on Wednesday 21st March 2012 was Dhs 3. So the Previous closing on Thursday 22rd March 2012 should have been Dhs 3. With that one trade at Dhs 3, should have not shown an increase of 4.90%. That seems to be very misleading.
But here on the Market watch at Dfm it shows the previous closing of 2.86.

It is very very confusing! i hope its just a technical glitch or a miscalculation of some sort.

Brother, i dont want to discuss it more. If its highlighted anywhere, you know the consequences.

I know what you mean, i have many times seen things of this kind here.
I own shares at DFMgi, im afraid if its highlighted it might detiorate the confidence of the investors further.

We cannot do much, we cannot ask any explanation from anybody.

Just Pray, things dont get worse than this.
Sikandar
opportunist
opportunist
 
Posts: 26
Joined: Sun 17 Apr 2011 20:56

Re: Worth of Company and Bonus

Postby wisk » Fri 23 Mar 2012 21:43

sharewadi wrote:But whether the dividend amount is 25 or 125 doesn't make a difference in your example since the calculation ...


Well, I apologise for arguments, however, am still confuse on the issue... I will take another example for it,...

Say, Company ABC (PJSC) with 1,000,000 shares get listed in DFM with 1,000,000 shares (1 AED par value). With this 1 million, it bought 10 buses each of 100,000 (I will not mention the other costs etc to make the calc simple)..

Lets assume, the share price remains constant through out year as no one bought any share no one sold... while in one year with 15% net profit the company earned 150,000 AED. Company decided to pay out 5% of par value as profit in Cash dividend (50,000 AED or 5 fils / share). And balance to re-invest and buy another bus.

In accounting, the first year depreciation is (say) 10% hence the Original Capital is decreased to 900,000 AED. While you have retained 10% of total profit i.e. 100,000 and bought a new bus (further investment), the total assets of the company remians the same as 1,000,000 AED, even after 33% of Total Profit (50,000 AED) or 5% of Par value is paid as dividend...

So in my humble opinion the worth of Company remains same as the dividends are from the profits which are earned in FY...

The price drop is more with the price movement on daily basis and with pschycological behaviour of people rather than accounting and balance sheet figures... as profits / dividends are not considered as expanses, assets or alike...

I am not Accountant to verify but this is as per my little knowledge... I thing sam of Thaj once said that they are from Account Experise... so please shed some light on this...

Thank you share wadi for being patience with me...
sMiLeS AcRoSS MiLeS
User avatar
wisk
speculator
speculator
 
Posts: 308
Joined: Thu 01 Jan 2009 21:43

Re: Worth of Company and Bonus

Postby sharewadi » Fri 23 Mar 2012 23:37

wisk wrote:Well, I apologise for arguments,

No need to apologise. I'd hardly call it an argument anyway. A discussion seems more appropriate :).

wisk wrote:Say, Company ABC (PJSC) with 1,000,000 shares get listed in DFM with 1,000,000 shares (1 AED par value). With this 1 million, it bought 10 buses each of 100,000 (I will not mention the other costs etc to make the calc simple)..


Shareholder (or Owner's) Capital = AED 1,000,000 from shares issued
Assets = AED 1,000,000 (10 buses x AED 100,000 each).

wisk wrote:Lets assume, the share price remains constant through out year as no one bought any share no one sold... while in one year with 15% net profit the company earned 150,000 AED. Company decided to pay out 5% of par value as profit in Cash dividend (50,000 AED or 5 fils / share). And balance to re-invest and buy another bus.

In accounting, the first year depreciation is (say) 10% hence the Original Capital is decreased to 900,000 AED. While you have retained 10% of total profit i.e. 100,000 and bought a new bus (further investment), the total assets of the company remians the same as 1,000,000 AED, even after 33% of Total Profit (50,000 AED) or 5% of Par value is paid as dividend...


Income statement shows net profit AED 50,000 (Gross Profit of AED 150,000 less AED 100,000 for new bus purchase)
Assets = AED 1,050,000 (900,000 depreciated value of 10 buses + AED 100,000 for new bus + AED 50,000 bank balance from Net Profit)
Shareholder Capital = AED 1,050,000 (AED 1,000,000 + Net Profit AED 50,000 transferred to Balance Sheet as retained earnings)

So ...

If AED 50,000 Net Profit paid out as cash dividend, that's 5% or 5 fils per share. Then after dividend is paid, the figures look like:

Assets = AED 1,000,000 (previous figure less AED 50,000 paid out as dividends)
Shareholder Capital = AED 1,000,000 (previous figure less AED 50,000 paid out as cash dividend)

So yes, company value remains the same. But it wouldn't if a different figure for cash dividend was paid out (e.g. 2.5%, or 10%, or ...).

However, if instead of a cash dividend, the company issued a share dividend of 5%, then the figures look like this:

Assets = AED 1,050,000 (buses plus Net Profit retained as cash).
Shareholder Capital = AED 1,050,000 (previous share capital + AED 50,000 value of 5% new shares issued = value of net profit).

Actually, now I'm not really sure what the disagreement is :? .

The original question was about what difference it makes from the perspective of individuals owning shares - whether a cash or share dividend is better (in financial terms). The answer being no difference from a technical perspective, but psychological effects mean different people have different views.

We seem to have ended up trying to figure out what difference it makes to the company. Which is that issuing a cash dividend decreases the value of the company by the amount issued, but issuing a share dividend doesn't change the value of the company.
Please read forum posting guidelines, especially if you have been deactivated.
User avatar
sharewadi
moderator
 
Posts: 14423
Joined: Fri 19 Aug 2005 11:10
Location: up the wadi without a paddle

Re: Worth of Company and Bonus

Postby ixtira » Sat 24 Mar 2012 09:04

sharewadi wrote:Which is that issuing a cash dividend decreases the value of the company by the amount issued, but issuing a share dividend doesn't change the value of the company....


Except that some bonus shares get sold and some cash dividends get reinvested.

The real difference is the all share dividends are automatically credited into the investors account ... cash dividends are no always so simple.

I vote for shares.
User avatar
ixtira
mercenary
mercenary
 
Posts: 600
Joined: Mon 11 May 2009 13:59

Next

Return to Beginners share investment guide and questions

Who is online

Users browsing this forum: No registered users and 0 guests