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CEMEX, S.A.B. de C.V. Message Board

• thebigbutt2001 thebigbutt2001 Oct 19, 2007 10:45 AM Flag

Simple math so Mishka can understand

Company A is publicly traded and has 100 shares outstanding.
Company A earns \$100.00 a year in profit or \$1.00 per
share (that is \$100 of profit divided by 100 shares equals \$1.00...are you still with us Mishka?).

Now, Company A decides to pay a dividend of 1/100th of a share on each share of outstanding stock. (I'll go slowly for you 'cause this is where it gets complicated) 100 shares outstanding @ 1/100th of a share each equals a total of 1 share to be paid out.

Now, Company A continues to make \$100 in profit but now there are 101 shares outstanding (after the dividend pay-out) Hence, \$100 of profit divided by 101 shares equal�s \$0.99 cents earnings per share... Company A's earning per share has been diluted by \$0.01 per share due to the stock dividend.
If I have missed something here would you please let me know.

Mishka, I hope you have followed this, if you need a calculator I will mail you one. Hey, did you know that the
opposite happens when a company does a share buy back?
Or do I need to explain that also?

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• 100,000,000 shares over AVG VOL.

Splain....

Mr. Lorenzo H. Zambrano , 62
Chairman and Chief Exec. Officer N/A N/A
Mr. Rodrigo Trevi��/b>, 50
Chief Financial Officer N/A N/A
Mr. Francisco Garza , 51
Pres of North American Region & Trading N/A N/A
Mr. Fernando Gonzᬥz , 52
Pres of Europe Middle East Africa & Asia Region and Pres of Expanded European Region N/A N/A
Mr. Juan Romero , 49
Pres of South America & Caribbean N/A N/A

(negative)

• 100,000,000 shares over AVG VOL.

Splain....

Mr. Lorenzo H. Zambrano , 62
Chairman and Chief Exec. Officer N/A N/A
Mr. Rodrigo Trevi��/b>, 50
Chief Financial Officer N/A N/A
Mr. Francisco Garza , 51
Pres of North American Region & Trading N/A N/A
Mr. Fernando Gonzᬥz , 52
Pres of Europe Middle East Africa & Asia Region and Pres of Expanded European Region N/A N/A
Mr. Juan Romero , 49
Pres of South America & Caribbean N/A N/A

• Can anybody help, bigbutt with her math? I can't believe you still don't see your error, bigbutt. Let my try to teach you what has to be one of the most basic lessons of investing, but I feel bad because you are going to feel so stupid. Using your example, as a SHAREHOLDER if I own 1 share I own 1% of the profits of the company, in this case \$1. Ok, stock dividend is declared and I get .01 shares using the 1% stock dividend, agreed? Now I have 1.01 shares. There are 101 shares outstanding with earnings that have claim on \$100 of earnings, so \$.99 per share. As I own 1.01 shares, how much of the earnings do I own? Drum roll please........\$1.00, or 1% of the earnings. The exact same amount as before the dividend. I haven't been diluted 1 cent. The earnings per share has gone down, but there has been no dilution since that are now more shares owned by the shareholders. Shares can't be diluted, only shareholders. I feel stupid even typing this. This is so very basic anybody who doesn't get this has no business investing.

• Dividends are only dilutive of earnings if the dividend is a STOCK dividend. Most dividends, however, are paid in cash, so most dividends are NOT dilutive of earnings per share because there are not more shares outstanding after the dividends.

Now the book value per share of stock outstanding is lower after a dividend is paid. So the net assets per share outstanding is lower after a cash or stock dividend, but dividends are NOT dilutive of earnings per share if paid in cash.

• 2 Replies to proudblackman9999
• Why don't we just get this recession over with?

Hey way too many bought houses they couldn't afford and many of the folks buying the mortgage CODs were leveraged 100 to 1.

But lowering rates will not solve this structural problem in the REAL economy. Maintain liquidity for convential mortgages, restructure reseting mortgages where the borrower can otherwise afford to pay their mortgage payments, maintian the current Fed rate, and then let the cards drop where they may. Excessively LOW interest rates got us here in the first place, the Fed bringing rates down more will just result in the same. If U.S. goes into recession, asset prices drop, inflation moderates, illegal immigrants leave, commodity price drop some, and trade gap narrows.

Let's just get on with it.

• Mr. Proudblack,

Agreed. A cash dividend does not affect earnings per share.

But poor little Mishka can not grasp the fact the a stock
dividend effects Earnings per share" i.e. dilutive to earnings per share.

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