| Certainly, there are just so many factors | | | | maintain its share price at cheaper rate |
| affecting share prices. For example, high oil | | | | without splitting the stocks. Bonus issue is |
| prices, interest rates, GDP and CPI to name | | | | also a good way to reward long term stock |
| few. However, many beginners are focusing too | | | | investor. |
| much on the external factors than what can | | | | |
| happen from the accounting perspective. They | | | | Ideally, the share price drops the same ratio |
| can easily get frustrated from their own | | | | of bonus issued. For instance, if the company |
| ignorance. Therefore, before you think of | | | | is giving one new share for each four shares |
| getting cheated next time, spend time to read | | | | own by the shareholders, the share price will |
| this article very carefully. | | | | drop by 20%. |
| | | | |
| Dividend Effect | | | | Warrants Exercise |
| | | | |
| I love dividend as much as you do, but | | | | With warrants, you have the right to buy |
| apparently, it does not comes for free. | | | | shares from a company after the exercise date |
| Simply because, the share price drops in the | | | | at specified price. As a result, its earnings |
| same value as the dividend paid after the | | | | will be diluted as more shares are sharing |
| ex-date. For instance, if Wal-Mart Stores | | | | the same earnings pie. In general, the share |
| Inc. decided to distribute $1 per share as | | | | price drops the same proportion of the number |
| dividend to its shareholders, its share price | | | | of exercised shares. For example, if the |
| will generally drops from $49 to $48 per | | | | exercised share is 10% of the existing number |
| share after the ex-date. | | | | of shares, the stock price will normally |
| | | | drops by 10% as well. |
| So, do not comment so much in the future if | | | | |
| the stock price drops after the dividend | | | | Unfortunately, unlike stock split, these |
| payout, because you took the money away | | | | factors are diluting the earnings per share |
| already. | | | | (EPS) of the stock, which in turn will adjust |
| | | | the share price accordingly. That is why, the |
| Bonus Issue | | | | stock price will get affected if any of the |
| | | | events happen. Although long term investors |
| Bonus issue is additional shares given by the | | | | do not care much about it, stock traders |
| company to its existing shareholders. By | | | | (esp. swing traders, day traders, position |
| doing so, the company is able to reinvest the | | | | traders) should consider these factors |
| dividend cash for better earnings growth. In | | | | seriously. |
| fact, this is another way for the company to | | | | |