2017

Mar
14

Traded split-tickers FOR DUMMIES :)

Learning stock trading on the NYSE, Nasdaq, Amex

If anyone knows what is the stock split, this is when the company, traded on the stock exchange decrease/increase the value of their shares, accordingly, adjusting their number. The most common split 2:1. For example, the shares were worth 100 $ , and on the day of the split is reduced in value by half to 50 $ , but a twofold increase in the number of shares in the brokerage account owner. This procedure, almost, no different from the dividend payment, only much cheaper, since the payment of dividends falls on 1-10%, and when split into 50%, but in fact, this is a dividend value 100%, as -50% it +100%, if to look from below. Which is better, dividends 1-10% or dividends 100%? Any dividend investor, even without using a calculator, the answer is that the second option is incomparably better than the first.

But some meticulous and distrustful investors will surely wonder — and where do the dividends? They are also the split is not paid through 25 days after the split on the brokerage account. Yes, do, you always have to question everything. Compare the dividend strategy and splits.

For example, have on the account 1000 stock. Share costs 100 $ . Total, balance or the trader's capital equal to 1 000 * 100 = 100 000 $

  1. In the case of dividends 5%, on the day of cutoff stock price falls to 95 $ , the capital was reduced to 95 000, but after 25 days to the account will receive 5 000 dollars in the form of dividends and capital will be restored to its former 100 000. (for simplicity assume that the stock price remains at the same level). The money can be purchased 52 shares 95 dollars and still have 60 $ . Total, total capital is equal to (1052 stock * $95) + $60 = $100 000
  2. In the event of a split 2:1, on the day of the split the stock price will fall to 50, but the number of shares will increase to 2000. And capital will remain the same 50 * 2 000 = 100 000. Now, by analogy with the dividends, sell 1000 shares 50 and we believe that it is our dividends. Printing them 50 000 with a brokerage account and put it under the pillow on 25 days (by analogy with the dividend strategy). After that we start our, how would, dividends back to the brokerage account and can buy more 1000 shares 50. Reinvest, so to speak, dividends. Total, the total capital will be $50 * 2 000 = $100 000. That is exactly the same as in the dividend strategy — remained at his. The main thing, this strategy is to keep the money under the pillow 25 days, and then, at default of this condition the result might be different.

So, the result, as for dividend strategies, and split received the same result. But what's the advantage of split before dividends? Plus the fact that in the second case was obtained much more dividends than in the first. 100% the dividend is cool.

Skeptics, for sure, floated his penultimate trump on dividend gepe, who ever closes, here then will be the profit. Is the answer — imagine what will happen when the gap from the split closes…. it will be something :)

And the last trump skeptics — they say, they say that before a dividend cut, the share price grows, respond with the phrase from a joke " and you say"…. before the split, too, price increases :)

In General, summing up, evestrum in splits and grief do not know.

More, collated details,  will be held in the course of the young fighter on the Moscow stock exchange "high-yield investing in split-tickers". Sign up. Left 15 free chair.

Learning stock trading on the NYSE, Nasdaq, Amex

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