What Happens to Dividends After a Stock Split?

Upcoming cash dividends can be affected in a couple of ways when a company decides to issue a 澳洲幸运5官方开奖结果体彩网:stock split or 澳洲幸运5官方开奖结果体彩网:stock dividend. The dividend will be adjusted along with the sha🍸re price in most cases. The key factors are the date of the stock split and the time of the cash dividen🌸d's record date.

Stock Splits After the Record Date

A stock split is an action taken by a company to divide its existing shares into multiple shares. A holder of 100 shares before the split will hold 200 shares at $50 per share after the split if a stock is trading at $100 per share and the company initiates a two-for-one stock split. The split is cosmetic in nature and 澳洲幸运5官方开奖结果体彩网:doesn't affect the value of the holdings.

A cash dividend typically won't be issued to new shares that were created if the split date occurs after the 澳洲幸运5官方开奖结果体彩网:dividend's date of record. This is similar to how an investor doesn't receive dividends for stocks that were purchased after the dividend's 澳洲幸运5官方开奖结果体彩网:record date.

Suppose XYZ Corporation has set aside $2.5 million and plans to pay a $2.50 dividend on Dec. 8 to all its shareholders on record as of Dec. 1. There are one million 澳洲幸运5官方开奖结果体彩网:shares outstanding. The corporation is planning to have a two-for-one stock split on Dec. 6. The split𝐆 happens five days after the record date so all those newly🦋 created shares won't be eligible for the dividend on Dec. 8.

Stock Splits Before the Record Date

The dividend will generally be paid out for the newly created shares when the stock split occurs before a dividend record date except the divide𒊎nd will likely be split compared to previous periods. Companies want to maintain the number of dividends issued.

Let's say that XYZ Corporation has set aside $2.5 million and plans to pay a quarterly $2.50 dividend on Dec. 8 to all of its 澳洲幸运5官方开奖结果体彩网:shareholders on record♌ as of Dec. 1. There are initially one million shares outstanding.

The board of directors authorized a stock split on Nov. 31, however, so the holders of the one million shares outstanding will now be the holders of two millioꦺn shares outstanding. The company will be taking the $2.5 million as a result and then issuing a $1.25 dividend to the holders of its two million shares outstanding.

A company typically won't issue dividends and split its stock around the same time because it tends to complicate things. The shareholders who hold throughout this period will effectively be paid the same amount in total dividends regardless of whether there was a split in situations where a dividend and a split occur.

The Bottom Line

A stock split occurs when a company divides its shares into multiple🐲 shares. Current shareholders receive more shares. You might receive two𝔉 shares for each share you own in a stock split.

This doesn’t increase the value of the shares, however. The price of each share is correspondingly reduced. Shareholders still receive the same dividend payout they would have received before the stock split. It's just split because the shares were doubled.