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Eaton Corporation plc Message Board

  • no156tbird no156tbird Jan 20, 2014 2:28 PM Flag


    Got a message not long ago that shows people on this board don't really understand a stock split and what happens. When the stock is split everything associated with it splits. IE: On a two for one split 1000 shares become 2000 but the price formerly at 100/sh becomes 50/sh, the EPS at 5/sh drops to 2 1/2/ sh and the dividend formerly at $1.80/share annually or $.45/sh quarterly drops to $.90/share annually or $.22 1/2/sh quarterly. So the split itself does nothing initially for you except give you more shares at the same overall value. What does happen is that shares outstanding increases and at the new lowered price makes it less costly to buy shares. Hopefully the company does well and those shares become popular and increase in value as earnings increase and more people buy into the float. Keep in mind that EPS (the key element in stock investing) is determined by dividing earnings by the number of shares outstanding. Thus with more outstanding shares from the split, earnings must increase accordingly to maintain and increase the EPS. to grow the share price otherwise the opposite happens and the price goes down. Still want that split????

    Sentiment: Hold

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    • boy you're a real fart smeller so nice to share all of your wisdom with us.

    • I'll grant you that spits are a matter of perception in many respects but you're on the wrong side of the widely accepted perception that a stock split increases buyer interest and in general is viewed as a positive. Especially, when a company has a history of growing towards a particular price target and then splitting every 6-7 years (wash, rinse, repeat). You also fail to acknowledge that Eaton is a tremendous dividend stock that pays out per share. Double the shares, double the dividend.

      This is the second time that I've replied to your post and I'm hoping they were constructive. Of course, if you're shorting Eaton - good luck and goodbye.

      Sentiment: Strong Buy

      • 1 Reply to jdaikman
      • True a lower per share price does increases buyer interest but unless the earnings grow the multiple of earnings per share, that interest wains. Don't know if a company grows towards a particular price target, The price results from earnings growth not just a target. At least that's what they teach in economics classes. Targets are hopeful wishes. Unless the company increases the dividend doubling the shares brings you the same amount that you got from the original shares in total. Simple math. If you split the shares you likewise split the dividend. (100 shares at $1.80/sh equals $180. and with the split 200 shares at $.90/sh equals $180.) More shares only means more dividend money if the company increases the amount of dividend per share. You want to double your dividend check, buy more shares. My Eaton shares have been in and are staying in for the long haul.

        Sentiment: Hold

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