Business & Finance
Stock Market
Investment Theory

How would the price of a stock be affected by its dividend?


Top Answer
User Avatar
Wiki User
2005-12-28 06:03:36
2005-12-28 06:03:36

Paying a dividend costs the company and as such will decrease the value of the company and the stock. If all other factors are equal, a buyer would prefer a stock that is expected to pay the higher dividend. If Company A is expected to pay $10 per share annually and Company B $8, an investor who wants to make 8% would be willing to bid $125 for a share of Company A but only $100 for Company B. On the date that a dividend is effective, a company's stock will drop by the amount of the dividend because that amount will be paid to the person who owned the stock at the beginning of that day.

User Avatar

Related Questions

To answer this question, the appropriate formula is the discounted dividend model without growth which is presented as follows: P = DIV / r where P = price of the stock DIV = the amount of the annual dividend r = the required rate of return Using the above formula: V = $6.50 / 6.5% = $6.50 / 0.065 = $100 The price of the stock would be approximately $100 using the discounted dividend model.

The ex-dividend date is the date on which a stock no longer trades with it's most recent dividend. Stocks purchased on the ex-dividend date will not settle in time for the record date (date in which you must be an owner of stock on the company's books). Because of this you would not receive the dividend that is soon to be paid out. Stocks are usually noted with an x before their symbol on this date and the quoted price will typically be lower due to the fact that the stock is no longer trading with the dividend.

Sometimes there is a relationship between shareholder return and the price of a stock. However, it is not real close. People buy a stock on the basis of what they think it will return in the future rather than what it has returned in the past. If a stock keeps slowly increasing its dividend, people generally assume that the company will continue in that direction. Most people would pay a little more for that stock than they would for a preferred stock in the same company that would never increase its dividend. However, if a company decreases its dividend, people take that as a negative sign. A number of people will dump the stock. It can still be a good company but a lot of people will get out. They see a company that is getting into trouble. The stock could fall below what it would be if just the ratio of the last dividend to the price were considered. Some people will buy the stock because they see a stock with a 10% dividend. A number of companies do not pay dividends. Some are startups with special products that a big company might purchase. There is no telling if their product will ever be worth anything. That is strictly a gamble.

If stock dividend is received then it will be shown under cash flows from investing activities while if stock dividend is paid then it is shown under cash flow from financing activities.

Dividend rate is defined as a % when compared to the face value of a stock. Dividend is nothing but periodic sharing of profit by public limited companies with its share holders. Assuming a stock with a face value of Rs. 10/- declares a dividend of Rs. 5/- per share then dividend rate would be 50%

It's not. At least they pay a dividend.

Stock price would not be stable, it will be keep changing.

From A dividend paid as additional shares of stock rather than as cash. If dividends paid are in the form of cash, those dividends are taxable. When a company issues a stock dividend, rather than cash, there usually are not tax consequences until the shares are sold. These additional shares of stock are usually distributed to shareholders at no cost. Please see the following site for additional information:

General MathA dividend is the number that is divided by the divisor. The answer would be the quotient. In a mathematical sentence it would look like this: dividend divided by the divisorequals the quotient.InvestingA dividend is a payment made to the shareholders as a way to share company profits. It is generally only paid by the largest companies and is not guaranteed. If the company has no viable use for the cash from profits, paying a dividend is a way to increase shareholder loyalty. It is expressed as a percentage. The dividend is divided into the price of an individual share of common stock to arrive at the dividend percentage.In Mathematics. a dividend is a number that is to be divided by a divisor, resulting in a quotient.

I would like to recommend you to drive thru with highest yield dividend stocks with good potential in the market.

The current stock price? Well that would be $7.

I just looked it up and yeah there is no cash and your stock is decreasing. (OOPS THAT WAS MEANT TO BE A COMMENT.)

Yes. For example a company with a 10p dividend that stays constant but whose net profit increases must be spending that net profit on assets or growth or other 'good' things that should increase the value of the company - otherwise they would pay it out and increase the divi!

The stock that forms the part of the index will have a weight in the index, i.e. how much the movement of that stock affects the movement of the index. When a dividend goes ex, this will trigger a 'drop point' on the index. This is calculated from the value of the dividend, the weight in the index and the fx rate, if the stock is priced in a different currency from the index. When a dividend goes ex, the price of the underlying stock will open that morning lower by the amount of the dividend. This usually doesn't have a huge effect as the percentage change is well within day trading movements of a stock anyhow. The same applies for the level of an index move - the index will open lower by the drop point amount, but will generally be negligible on the movements of intra-day trading anyhow. You may have to be careful with special dividends, as they can be a higher percentage of the stock trading price, which may actually cause a noticeable drop in intra day trading price. They can also affect index levels. Dividends have a different effect on options though, but generally the price of a basic call / put would already have been adjusted before the ex-date. If you have a structured product, for example a vertical spread consisting of 2 long and 2 short options, then your position won't be affected as what you lose on one you will make on the other. If you have a time spread where your position is dependant on the stock price staying where it is, then you need to do further analysis on your Greeks and how it will affect option price. Thanks.

Cum-dividend (CD) comes before Ex-dividend (XD). A stock is said to be CD indicates that the company is paying out dividend in the near future which serves like a preempt notice to investors. The company would have announced the amount of dividend to be paid out but has yet to. If the shareholder sells a CD stock, he/she is not entitled to the dividend. There has to be a cut off date that the company has to set, so as to confirm the list of shareholders to receive dividend. When the list is finalized, the stock is said to go XD. Once XD status is declared, the shareholder who sells his/her shares will still be entitled the dividends, while the new owner will not.

Cost price (Purchase price) or market price whichever is less that would be taken as Closing Stock

You would first have to know a few things. Date of purchase? august 1, 1982 Quantity of purchase? 4 Purchase price? 5,000 Were there dividends? unknown Were the dividend reinvested in stock or paid in cash? How many times has the stock split? unknown The rest is just math.

A corporation with a marginal tax rate of 34 percent would receive what after-tax dividend yield on a 12 percent coupon rate preferred stock bought at par assuming a 70 percent dividend exclusion?

Some technical terms used in stock trading would be dividend, split, and gain. Dividend is an amount of money paid to stock holders based on how many stocks they hold, split is when the stock splits and doubles the amount available, and a gain is any rise in the stock's value.

Around that time Ford stock went to over $69.00 and then split, after split value was less but very strong. Ford reached a high of 65.94 in 1998 just before paying a 12.07 per share Dividend. If you were to adjust for Dividends, split and recapitulation that share price would be appx. $20.

Some times a corporation would like to pay out a dividend but they just don't have the money. They could pay what is called a stock dividend. For instants they could pay out one share for every 10 shares you already have. When they do this you are not really gaining anything, because it usually means that the stock shares are worth 10% less. But at least it makes people feel good, when they get that stock certificate in the mail. Some times a corp. will give you a choice. You can take a dividend check or more stock. One more thing. Sometimes you do not get a stock certificate for the additional shares. Some times they are put on a statement and the shares are held for you.

Silver is not a company. It would not appear on the stock exchange.

Preferred shareholders are the people who own a company's preferred stock. Corporations can issue several types of stock. If there are profits, the corporation the corporation may pay dividends. The company would pay the same amount to each share of stock. However, the company may have issued two types of stock, preferred and common. Preferred stock gets a percentage of the face value as a dividend say 5%. Common stock gets a percentage of the profits that are left. So if a person has a $100 share of preferred, and the company declares a dividend, the preferred shareholders are paid first. He gets his $ 5.00 first. He is a preferred shareholder. The rest of the dividend is divided among the common shareholders. So Preferred Shareholders get paid first. Their dividend will never go up. It will go down if the company does not pay its dividend.

Copyright ยฉ 2020 Multiply Media, LLC. All Rights Reserved. The material on this site can not be reproduced, distributed, transmitted, cached or otherwise used, except with prior written permission of Multiply.