hydro, the company is definitely nearing a point where they traditionally split the stock, and one thing it does do, is show the public, that the company is feeling secure about future earnings and they can support a larger share base with future increases of dividends.
I just don't see the relationship. It doesn't matter if they have 600M, 1.3B or 2.6B shares outstanding. Instead of increasing the dividend by 2 cents to $0.46 they increase it by 1 cent to $0.23 or 0.5 cent to $0.115. The % increase is the same and the amount of money you get is the same. It's all relative. Psychologically it might feel a little different but financially it's all the same. 1.9% dividend is 1.9% regardless of the #shares and price relationship.
You are correct rich u didn't get it. The company splits the stock, with a $2 div. That = 1.3 bil shares, and $1 per/sh div which = $1.3 bil. You raise the div .05 for five years that = 1.25 div that = $1.63 bil div per year. Now, if it had not split the stock and still raised the div .05 for 5 years, that would = $2.25 div, that = $1.45 bil per year. The more splits you have the more shares the company has to support in the future, doesn't really matter a whole lot until ruff times, that's how companies like GE w/10 bil shares have to cut div.
I probably should have explained it better first time.
I'm not concern with investors cost base, when it comes to a split, it doesn't really change unless you are reinvesting the dividend back into the stock. The part I don't like is the company having a bigger burdened increasing the yield in the future with more shares.
But Ben that's now how it works. They wouldn't increase the dividend by your hypothetical .05 per year after the split. They would increase it by only .025 to account for the fact they have more shares to service. The % increase would be the same. I guarantee they don't think about how much to increase the dividend in $.xx terms. They think about how much of the total free cash flow they can afford to pay out and back calculate how much that is per share. So it doesn't matter how many shares are outstanding. The dividend is adjusted accordingly. All things being equal, the dividend is cut in half per share at the split and any future increases will be half as much as they would have been as well, but to the share holder it's all the same. Half the dividend twice the number of shares. Nada.
Then how is it any different from now? The stock splits the dividend splits and any future increases are split as well. Look at history, every time the dividend gets up to $0.40ish the stock splits and the dividend goes back to $0.20ish. Then the increases that had been $0.04 - $0.06 go back to $0.02. Nothing changes. The company's obligation to it's shareholders is exactly the same. I'm clearly missing your point. But enough of this thread already. Have a great weekend. -$2.47 ouch.