Is there a benefit to buying before a split? My understanding is that if I spent $1000 today vs. after the split, I'm still going to end up with the same amount of shares because the price per share also splits based on the ratio.

I think what you lose is the bump in price that the split can cause. Usually after the split the price goes up cause its now cheaper and opens it for more investors.

Is there any mention of an increase in the level of dividends accompanying the split or would that be announced at the time of the split? I'm trying to understand the possible benefits to a split other than more shares. The price will adjust accordingly so you really aren't gaining on that end. A stock dividend will also add more shares but the investment amount stays relatively the same. The one benefit to a stock dividend is that it won't be taxed until you sell unlike cash dividends.

Sorry I'm thinking out loud. Just trying to understand the benefit of a split. Unless the benefit comes in the long term with share prices rising beyond what they were before the split. Then I can see some benefit in which you didn't buy shares but received them via a stock split. I could be completely wrong about everything. Sorry for thinking out loud.

That would make sense. You won't be able to beat the market trying to jump in after the split so having the shares before hand should also net you the jump in price. I tend to overlook the simple and think about the complicated. Thats if the share prices rise after a split.

Would a date be announced similar to an "ex-dividend date" or "date of record" for a split letting you know when you'd have to own the shares by to split your shares?

Jose ---

Usually a spilt is like getting a bump in the dividend -- because generally the stock continues to rise -- but now you have twice as many shares. That's not always true - but generally a company splits it's stock because things are going well. That's really the most crucial underlying point -- you want own good (GREAT!) companies to begin with... and the rest just "happens".

Splits are what made the dot bomb companies go crazy with share price growth -- Microsoft - Dell - Intel - etc all split and had babies like rabbits. Back then it was a lot of explosive growth -- where as Coke (KO) is just good old fashioned organic growth.

So here's the real crux of anything like this - whether you buy before - during or after a split -- what you really want to buy is a great company. Don't play the split 'game' -- if it's a company you want to own - great - if not - then move on and buy something else but don't buy just based on some exogenous event.

Coke has been on my "buy" list for a while, I'm just wondering if there was a way to benefit from the split. Either way I'll pick it up.

I think you'd benefit regardless of the split.... It has a 50 year track record of great growth -- pays a dividend... and blah blah blah... but it's a long term buy and hold - reinvest the dividend kind of stock.

Same here... have had my eye on it for a while now, just saving up the $ to the price point that i want to make purchases at ($1k for me).

Im curious as well, if its worth jumping into before, or like previously mentioned, wait til August before jumping back into the market... either way, long term, it probably wont make a HUGE difference, but could be a subtle difference down the road.

LONG TERM it makes about zero difference.... here's what does make a difference --- BEING OUT OF THE MARKET.

It's a proven numerical fact that GAINS in the market are only actually made a few DAYS in any given year -- the rest of the year it moves two forward - one back - three back - two forward.... BUT a couple times a year there are nice big PERCENTAGE moves and if you're out on those days - you've lost the largest percentage for that particular year.

Coke has split 10 times since 1919.... do the math of how many shares you'd have starting with ONE share in 1919... and splitting 2 for 1 ten times - and now once again so 11 times....

1

2

4

8

16

32

64

128

256

512

1024

2048

And this last time


4096


None of us would have lived that long -- but it begins to be the law of large numbers --- do the math had you bought 100 shares back at 256 !

:woot:

Okay -- but here's the REAL splits for Coke since 1919.... so my math is TAME compared to the actual numbers!


The Coca-Cola Co. is seeking its first stock split in 16 years. Here's a look at the beverage maker's 10 other stock splits in history, along with the price of the stock before the split.

1919 – Shares begin trading at $40 per share.

1927 – 2-for-1 split – $199.50

1935 – 4-for-1 split – $290

1960 – 3-for-1 split – $153.75

1965 – 2-for-1 split – $146.50

1968 – 2-for-1 split – $155

1977 – 2-for-1 split – $73.75

1986 – 3-for-1 split – $117

1990 – 2-for-1 split – $76.75

1992 – 2-for-1 split – $82.88

1996 – 2-for-1 split – $81.75

2012 – Coke seeks 2-for-1 split. Shares closed at $74.12 Tuesday

"If the latest proposed split is approved, the company noted that a single share purchased in 1919 for $40 would be worth more than 9,000 shares and $341,545. If dividends were reinvested annually, the share would be worth $9.8 million.

Huge difference in the amount it's worth with the reinvested dividend. The power of compounding is amazing.

And there is the $64 million dollar answer to why you shouldn't be very concerned about when to get in.... JUST DO IT!


:woot:

Kinder Morgan Partners (KMP) went EX dividend today -- so when you check the share price - it's DOWN - but it went ex $1.20 per share...

I'll take that $1.20 per share thank you very much! :thumbsup:

Obviously not a big deal to you but that would mean an extra $86 for me.

Newbie question here. If the dividend is reinvested do I still pay a brokerage fee for buying that 1 stock? so would it be better to save a years worth up then buy more.

Not sure on your brokerage, but i know for sure with Sharebuilder i DO NOT pay a fee to reinvest the dividend.

Looks like todays been a good day to me on the market.. I've finally got slightly over a 1% total gain back in my port, and got 2 more shares of NLY thanks to their dividend today. :cheers:

A couple things I noticed about Coke, that $40 initial share price is $547 in today's money. And, look what the company did during the great depression. Maybe it was the cocaine in it that helped.:lol:

Greg, don't forget this is Investing 102, I had to look up exogenous. :rofl:

Shouldn't be any commissions

Sorry on the road to thunderhill so posting from
My phone

Remember that $86 is FOUR TIMES PER YEAR....and grows each quarter as you buy more shares with the reinvested dividend. It's like a snowball on a downhill slope... after a while it will take off on it's own!

Oh --- can't not post and poke you in the eye at the same time.... my Annaly (NLY) dividend this quarter was $13,750. I added 10,000 shares to the name (now 35,000 shares) so next quarter it'll be even bigger. :unibrow: :D

I have been wondering is a stock split the same as a ex-dividend date.
You have to own the stock before a certain date?

Reason I ask was I have been looking at DGAS and they announced a split.
I was reading this article and it makes it sound like people that owned the stock before April 17th get the split. Is this a differnent type of stock split?

"The Board of Directors of Delta Natural Gas Company, Inc. (NASDAQ: DGAS - News), at its meeting on February 17, 2012, declared a two-for-one stock split of the Corporation’s issued and outstanding common stock for shareholders of record as of April 17, 2012. In its Order dated March 8, 2012, the Kentucky Public Service Commission approved the two-for-one stock split. The additional shares to be issued in the stock split are expected to be distributed, and the stock split completed, on May 1, 2012.

As a result of the two-for-one stock split, for every one share of Delta Natural Gas Company, Inc. common stock owned by a shareholder as of the close of business on April 17, 2012, the shareholder will on May 1, 2012 own two shares of Delta Natural Gas Company, Inc. common stock. Delta Natural Gas Company, Inc. is expected to commence trading on the NASDAQ Global Market on a post-split basis at the opening of the market on May 2, 2012.

The Company currently has 3,407,550 shares of common stock outstanding. After the stock split, the current number of shares of common stock outstanding will increase to 6,815,100 shares.

For additional information and a list of frequently asked questions (FAQs) related to the two-for-one stock split, please refer to Delta Natural Gas Company’s website at www.deltagas.com.

Glenn R. Jennings, Chairman of the Board, President and Chief Executive Officer of Delta Natural Gas Company, Inc., stated, “We would like to thank all shareholders for their continued support and trust in Delta Natural Gas Company, Inc.”

I own a small position in CHKR, and its dragging me down. was thinking of dumping it and getting into DGAS

Just an aside - there is NO quantitative historical proof that stock splits actual help or result in a stock boost. As an M&A advisor we had a deck that we showed management teams all the time, 15 pages of information, historical and quant based analysis - the summary was always the same "It won't help or hurt, companies just do it for optics sometimes".

It really should not have any impact on your decision at all. And I know optically you think a cheaper per share cost would mean getting more shares and thus more return, but in reality share count doesnt matter.

I would not do that.... you haven't owned it long enough - and you bought it for the dividend.

Regardless of when you bought the shares --- they will split. So if you owned them the day before the split - let's say you owned 100 on May 1st -- and May 2nd was the split date - when you check your account on May 2nd you will have more shares at less price per share.... They'll take care of everything for you....

sweet! I own some Coke. Fun times ahead it seems.

This article seems to echo what Greg has been saying about dividend investing:

http://seekingalpha.com/article/5417...ce=marketwatch

Don

EVERYONE NEEDS TO READ THAT ARTICLE.


Thanks Don for posting the link! :lateral: :cheers: :woot:

Good read, Thanks for posting

I own COP with only 80 shares, but today conoco phillips split of a parent company, Phillips 66. If you were a share holder you got half as many shares in the new company.
Phillips 66 is now its own company with its own stock. So I now own 40 shares of that today.

hopefully they continue to grow.

Ive been getting company shares since 2006, so I'm watching both COP and PSX with interest. So far they are doing as expected from reading up before hand on Alpha Seek.

First of all I would like to give a big thanks to the OP and all who have contributed to this thread. I have spent the past week or so reading through all 140 pages and I have learned more about sound financial planning in this past week than I have in the past 26 years of my life!

So here's my situation. I am 26, been working at an oil refinery for the past 3.5 years and have been contributing to my companies 401k plan since i started. Until now, i thought that as long as i put as much money into my 401k as possible and just "forget" about it, i would be living a 'coush retirement. All my company offers is mutual funds or target date retirement funds and bonds. I have spread my investments throughout my available options and the biggest gainer so far has been my S&P investment, except for last year my bonds did exceptionally well. My company matches up to 7.5% and over the past 3.5 years i have worked my way up to putting 20% of my paycheck into my 401k.

I also bought a house ~2.5 years ago and it has depreciated some, but nothing to make me run for the hills so I feel comfortable that I can ride out the storm and eventually come out ahead. My 401k currently has ~50k in it but now i want to open a Schwab account and start making my money work for me! I have enough saved in my bank account that I would feel comfortable putting ~10k into my Schwab account, but I still want to do some more research into which companies i would like to invest in. When I do so, I plan to take Greg's advice of starting with 2k in 5 different companies.

Now here's my question/dilemma. Since I have the power of time on my hands and since a Schwab account offers me so many more options than my company's 401k, should I "borrow" money (say 15-20k) from my 401k plan and use it to invest into my Schwab account? I would not do this right off the bat as I have so much to learn and I dont want to "learn" with that much money...but say a year or two from now, would that be a good idea? I realize that i have to pay some sort of tax penalty on that money taken out and also have to pay the amount taken out back, with interest. But my reasoning is that it seems like if i could be earning 8-10% or more in a Scwab account with that money i would still come out ahead after paying the fees. Plust i would have time/power of money combo??

I also realize this is a car building site, but after reading this thread i have decided to hold off on the ole' camaro for a year or two and use the money i was going to spend on that for investements. Dont hate me for doing so, but it just seems like the most financially responsible thing for me to do right now?

Thanks again for this great thread, i hope it keeps going for some time to come!

Now that i am on the soapbox, there has been some talk of oil companies and conoco phillips splitting and such. However, nobody has really talked about bp. Before the gulf spill, their stock price was ~80 bucks. After the spill, it dropped to the mid 20's and they stopped issuing dividends. As of this year, they announced that they will recontinue their dividend payments and the stock has slowly recovered to ~40. They are also selling two refineries, one them being texas city which has had a bunch of problems in the past. My thinking is that we already know this stock has the potential to reach ~80 bucks and they have continued their dividend payments. They have also started to settle a lot of their court cases, the only big question remaining is what the EPA is going to fine them for? I have my suspicions that this "judgement" is going to be used by the current president or next as some sort of political move and that is why the stock hasnt fully recovered. However, i can see the potential of investing into bp right now and riding out the storm knowing that it has the high likelihood of reaching 80 bucks again, aka 200% gain. Thoughts?Critisism?

FIRST! Kudos to you young man! You are so far ahead of the pack it's amazing!



SECOND = I wouldn't try to get "cute" with doing investing of any kind... keep it simple - just save money - salt it away in good stocks with dividends being re-invested and sleep well at night. The minute you try to get cute - the market will turn against you -- you'll worry -- and your best "plan" will go to hell in a hand basket. Don't do it. Just keep doing what you're doing.


THIRD -- Look into opening a ROTH account - and save the maximum you can using that funding mechanism. ALL of the growth and income etc comes out of a ROTH TAX FREE at retirement. Dude! You can't beat that! But there are qualifications etc. So check with Schwab on the rules.


FOURTH -- All of us have tried to steer clear of actual recommendations etc... So with regards to your BP question --- you need to go back and compare TOTAL RETURN over time - against other companies that you want to invest in -- spread some diversification in there with a little "risk"... You are YOUNG - you have time.... So if you think BP is the company you want to take on for a little "risk" -- then I say go for it. Just don't "GAMBLE" -- so just play with a small portion of your investable assets in something like that. BP certainly isn't going out of business.... and this is/could be a small blip that is a buying opportunity. Or not. We won't know that for maybe a couple years.

:cheers: :thumbsup:

Thanks for the reply Greg. I will try to keep posting and keep current on this thread as much as possible. Its more valuable than gold right now!

DICLAIMER: I have no investments in gold nor plan to invest in gold within the next 72 hours:D

Okay! That's funny as hell!

Greg mentioned the ROTH. If you qualify, consider not taking a 401k loan but reducing your 401k contribution down to the limit the company matches and putting the rest in the ROTH up to the max. Any leftover, tuck away into a normal investment account. As you accumulate $1000 or $2000, buy something....

Just something to consider. You have time on your side and slow and steady can win this race in a big way!

Greg thanks for the help so far. I am making some moves to be able to begin some investments based on this thread.

I have a bunch of $$$ in Mutual funds that have done me nothing over the last 10 yrs. Time to take a different approach.

Tried catching up on the thread and got through a small chunk of it.

couple new faces chimed in.. Sweet!!

welcome fella's. :lateral: :cheers:

Yeah buddy! X'2 -- right there with ya!

:lateral: :cheers:

So question....

With the "sell in may and go away" theory, that seems to be pretty consistent year to year... would now be a bad time to restructure/re-balance a 401k portfolio?