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Alliance Resource Partners LP Message Board

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  • sherryazure sherryazure Feb 2, 2011 9:32 PM Flag

    Split ?


    Forgive me if I sounded harsh with my first post - I just get tired of what if's and would rather deal with what is... at any rate here is some information.

    The stock split has no bearing on any increase or decrease of either dividend or distributions (MLP in this case - ARLP)... if by chance the stock PPS goes up after a split there are factors outside of the split that causes this - momentum traders, favorable sector, favorable fundamentals, so on... if it goes down (as happens) it is the reverse of many factors... Today's "institutional" traders trade often without concern for fundamentals - ie computer models often driving price up - then dump and they rotate to another stock or sector (often news driven).

    A split if it occurs at all is often given to allow people the illusion that they can get into the stock (ie lower price if regular split) but all is equalized.

    It CAN add liquidity (see below).

    More shares means larger positions can be taken by institutions.. without jerking the pps around (although most do not care these days)...hence the volatile drops and gains often intraday.

    When I started out long ago I often started with five shares (YES five shares) in pot for example - it all adds up - remember it is the percent gained (or lost) not the dollar amount that counts. Meaning although some think they can buy in if pps lower due to a split, it really does not matter if one understands the math by percent rather then share amount.

    When a company decides to issue a stock split (or stock dividend), a couple of possibilities could occur concerning what would happen to an upcoming cash dividend. The most important factors are the time the stock split happens and the time of the cash dividend's record date. Typically, a cash dividend will not be issued to new shares that were created from a stock split if the split date occurs after the dividend's date of record. This is similar to how an investor does not receive dividends for stocks that he purchased after the dividend's record date.

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    • For example, suppose XYZ Corp. has set aside $2.5 million plans to pay out a $2.50 dividend on December 8 to all of its shareholders on record as of December 1 where there are one million shares outstanding. Furthermore, the stock is planning to have a two-for-one stock split on December 6. Since the split happens five days after the record date, all those newly created shares will not be eligible for the dividend on December 8.

      As for situations when the stock split occurs before a dividend record date, the dividend will for the most part be paid out for the newly created shares as well. Except that the dividend likely will be split compared to previous time periods. This is due to the fact that companies want to maintain the amount of dividends issued. For example, suppose that ABC Corp has originally set aside $2.5 million plans to pay out its quarterly $2.50 dividend on December 8 to all of its shareholders on record as of December 1 that own the one million shares outstanding. Since the board of directors authorized a stock split on November 31, the company will be taking the $2.5 million and then issuing a $1.25 dividend to the holders of its two million shares outstanding.

      Typically, to avoid complication, a company will not have a dividends issue and a stock split around the same time. Effectively though, in situations where a dividend and a split occur, the shareholders who hold throughout this period will be paid the same amount in total dividends whether there was a split or no

      • 1 Reply to sherryazure
      • What Does Stock Split Mean?

        A corporate action in which a company's existing shares are divided into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because no real value has been added as a result of the split.

        nvestopedia explains Stock Split
        For example, in a 2-for-1 split, each stockholder receives an additional share for each share he or she holds.

        One reason as to why stock splits are performed is that a company's share price has grown so high that to many investors, the shares are too expensive to buy in round lots.

        For example, if a XYZ Corp.'s shares were worth $1,000 each, investors would need to purchase $100,000 in order to own 100 shares. If each share was worth $10, investors would only need to pay $1,000 to own 100 shares.

        While a stock's value is not found in its price, companies know that the price is a major psychological indicator of value. A stock split is designed to give the impression that a stock is more affordable by allowing investors to buy more shares for less money.

11.13-0.89(-7.40%)Feb 10 4:00 PMEST