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Pepsico, Inc. Message Board

  • painter1199 painter1199 Jan 26, 2014 7:01 PM Flag

    earnings

     

    since I have held Pepsi for so many years with dividend reinvestment I have almost doubled my shares, So when ask for more stock split I say bull give me earnings and dividend reinvestment not diluted shares on a split

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    • Does the dividend stay the same after a split? Or do they split that too? If the dividend stays the same, it would help you accumulate shares at a significantly faster rate. The only plus side to a split in my opinion.

      • 1 Reply to deraktiensammler
      • For the record, a stock split is neither more nor less than a marketing play by the company. It has zero effect on one's investment. In round numbers, say one holds 100 shares of PEP trading at $80 per share and paying a quarterly dividend of $.56 per share. The value of the investment is $8,000 (80x100) earning a dividend of $56 per quarter. If PEP splits 2:1, the investment is now 200 shares trading at $40 ($8,000 or 200x40) and paying a quarterly dividend of $.28 per share ($56 or 200x0.28) - i.e., NO DIFFERENCE. [Granted on some occasions a company will raise its dividends at the same time as a split, but that is not particularly common.] So, why does a company split its shares. Mainly, it is a cynical bet that investors are not smart enough to understand this.

        Years ago, the broker fees were based in part on quantity of shares traded, with a 'break' for a block (100 shares). At that time, a split may have had some advantage as a smaller total dollar purchase would get one to the 'magic' block size of 100 shares. Today with discount broker, as well as full service providers like Fidelity, offering trade fees well under $10 for any size trade, the number of shares is irrelevant. For example, in the early 1990's, through what then passed for a discount broker, I paid fees of $31 for 16 shares of ABC, $49 for 160 shares of DEF, $34 for 100 shares of GHI. A couple weeks ago I paid $7.95 for each of two purchases - the share quantities, price per share, and total purchase value were dramatically different.

        Okay, this was a long post, but there seems to be a lot of confusion around about what a split really does (or rather does not) mean. HTH

        Sentiment: Hold

 
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