The nature of the dividend in shares - Singapore Forex Trading, Singapore Forex Academy, Singapore Forex Association

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The nature of the dividend in shares
More listed companies perform dividend in shares and stock split according to the ratio (*), but most individual investors are still not understood the true nature of the financial on business, even with the dangerous misconceptions.
In essence, the dividend in shares (or bonus shares) are stock split transactions and it does not generate any new cash flow help enterprises (companies) increased their capabilities.   
 if existing investors 100 large loaves, he will get 110 smaller cake after dividend (dilution expressed in value). Accordingly, the total value unchanged while increasing the amount of bread they make of each pancake reduced prices go- this is the story of dilution issues.
Therefore, the company dividend in shares, the equity volume has remained , only small items in equity is change - usually a net profit after tax items undistributed surplus share capital or funds will be reduced to compensate for the corresponding capital Letang up. Or to put it another way, when the dividend in shares, the company did not generate any material value for shareholders, which is actually just a reciprocal increase or decrease in the book between items.
However, now many investors (investors) individuals still do not understand the nature of the business over, even if they still have many dangerous misconceptions. The writer would like to make the following common misconceptions:
(1) "dividend shares helped increase my property." This misunderstanding is the most common and is caused waves when news ceiling dividend in shares. In fact, although many stock investors have more, but the price per share has been diluted share split his assets should remain fully intact, not increased not decreased.
(2) "The share of ownership I got down from the other shareholders. " The proportion of investors owning shares remain completely unchanged, so that all shareholders are divided into shares corresponding to the percentage holding.  shareholders holding A shares in 100 1 of company shares - corresponding to 1% of the shares of the company. While 20% believe it divided in shares, he will get 1.2 shares in 120 shares - remained unchanged at 1% ownership.
(3) "stock dividend increase shareholder value by helping stock east to avoid the tax. " Dividend stocks help avoid similar tax on dividends is not retained by businesses to reinvest cash. However, to avoid taxation does not mean increasing shareholder value. Shareholder value is only increased when the amount of cash retained businesses effectively used.
(4) "Dividend by share capital increase demonstrates businesses than before, bigger expansion." This is only the first right-hand side for the dividend in shares was indeed help businesses increase their charter capital. But as mentioned above problems, in terms of nature, equity, total assets of the unchanging and above all do not have any cash flow generated new business flowing in. Thus, at first glance seem larger enterprises but really this is just the book business.
The payment of the dividend in shares helped shares in issue increased, thereby indirectly increase the liquidity of such shares . Moreover, if combined with the dividend in cash, an increase of shares will increase significantly more total cash dividends to shareholders in the case of many business enterprises effectively.
However, Investors also need to pay attention, pay dividends in shares sometimes become blow "threw a smokescreen" by many businesses. Taking advantage of the knowledge of shareholders is not clear, many business leaders have to conceal the lack of dividend cash flows (or intentionally leave large cash funds aimed at individuals) with the "bonus" shares more. By such, shareholders misperception that I was adding value but actually they get such value is nothing more than the number of "paper" increased.
In the bull market (bull market), policy Dividend stocks are generally many companies and even preferred shareholders. When stock prices are rising sharply, the dilution help market prices down, creating positive sentiment in the short term for investors wishing to invest. In addition, investors also expect the growth in the share price will then bring a bigger profit in cash. In contrast, the market price down (bear market), especially in the gloomy market phase, the dividend in shares will result in negative sentiment for investors because  dilution feeling stock prices back worse, investors also feel sure eat more when holding cash.
(*) The stock split is completely analogous to the dividend in shares, although the difference is not as split share increase its charter capital by reducing the par value split each share.