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Question about stock purchase and stock split

Posted by folkvictorian (My Page) on
Sun, May 26, 13 at 10:56

Several years ago I purchased some shares of stock and received a stock certificate. I'll use 100 shares of XYZ stock as an example.

A short time after I purchased the shares and received the certificate, the company announced a 2 for 1 stock split and it took place a couple of months later.

Down the road, when I go to sell the shares, will I still only own 100 shares? Or will I receive the benefit of the stock split and own 200 shares?

Thanks in advance for your help!

Follow-Up Postings:

RE: Question about stock purchase and stock split

Consider the dollar value instead. You bought 100 shares for $1000, for example. When you go to sell your stock, if you sell all of it at once, your cost bass will be $1000, regardless of how many shares. If you sell half your stock, that's 100 shares with a $500 cost basis. The brokerage house keeps track of these details for you.

Note: this scenario doesn't count any dividends that are reinvested in the stock.

RE: Question about stock purchase and stock split

Any future sale of your stock notwithstanding; in a 2 for 1 split, your 100 shares of XYZ becomes 200 shares. But - the value of the shares remains the same because the split does not add dollar value. IE one share of XYZ at $100 becomes two shares at $50 each at the split.

Stocks split because, over time, the share price gets too high for many average investors to purchase in round blocks.

RE: Question about stock purchase and stock split

You will have 200 shares of XYZ.

RE: Question about stock purchase and stock split

Thank you so much for your explanations!

RE: Question about stock purchase and stock split

You SHOULD have 200 shares of your stock. Didn't they send you a certificate for the additional 100 shares at the time of the split? My stocks always have done that. If you didn't get a certificate, you need to look into where those other 100 shares are--did the certificate get lost in the mail? or are they in an account in your name? How do you access them for sale.

You'd better call your broker or the company's investment dept and track down what the situation is.

RE: Question about stock purchase and stock split

Very few places send actual certificates anymore.
We haven't gotten any in years.

RE: Question about stock purchase and stock split

I have lots of stocks; I personally hold no certificates. Last physical paper certificate transaction I remember from long ago was surrendering some in a stock split.

With brokerage accounts and computer transactions, paper certificates are more "collectibles" now than anything else - also burdensome/time consuming for companies to continually issue them. Companies are still required by law to issue them to any stock holder who requests one, however. I don't think that law has changed.

You should be getting account statements - either from your brokerage or the company itself which detail your holdings.

RE: Question about stock purchase and stock split

When you bought your shares, if you bought 100 shares at $10.00 each for $1,000. total, after the split you owned 200 shares, with the same $1,000. total cost, which would be considered $5.00 each.

I bought shares in a bank 46 years ago, 100 shares at $16.00 each, total cost $1,600.

When they split 2:1, I had 200 shares, at $1,600. original cost basis of $8.00 each.

Then they split 2:1 again, so I now have 400 shares, at $1,600. original cost basis of $4.00 each.

Originally paid about 10 - 12 cents per year dividend, at lower than regular income tax rate.

In June of '07 I could have sold them for $107.00 each and they were paying $3.08 per year, at an even lower income tax rate. Later that year they increased the annual dividend to $3.48 per share, each one of which had cost me $4.16.

When they were involved in the U.S. financial fiasco a few years ago ... the value of each share dropped to $40.00, but the dividend remained the same.

Recently the value per share has increased to around $80.00, and, though there was no increase in dividend for about three years, it has since grown to about $3.76.

Annual return of $3.76 at low tax rate on an investment 46 years ago of $4.16 ... I can live with that!

If I can arrange to live for a few more years ... it may pay me each year what I paid for it in the first place!

ole joyful

RE: Question about stock purchase and stock split

Even with a MS in mathematics I cannot follow that convoluted explanation of an extremely simple problem. It would seem the problem has been upgraded to a solution involving complex variables,

We start with a simple stock split which morphs into dividends,taxes and the US economy. Huh?

RE: Question about stock purchase and stock split

Tripping people up in unnecessary detail is a common happenstance. I DON'T have a MS in mathematics, but I, nonetheless, grasp the concept of a 2 for 1 stock split.

RE: Question about stock purchase and stock split

Well let's see.....
We have a double split knocks the price down from 16 to 4.
Later the div was increased to 3.48 per share each of which had cost 4.16
After the US Financial fiasco (which one? which year?) the value of each share drops to $40.00 (from $4.16 ?)
Now the price seems to be $80/share.

We have a "low tax rate" thrown in for good measure - what is that?

So the share price has dropt from 16 to 4
Somehow that becomes 4.16
From there it "drops" to 40
Now it is 80. Another "drop"?
In '07 it seems to have been 107.
There is 46 years also thrown in.
So starting with the original 100 shares @ 16 = 1600
And now we have 400 shares @ 80 = 32000
But with average annual inflation of 4% for 46 years the original 1600 would be 9720 today.
So we are sitting on an LT gain (at low tax rate?) of 22280 in todays dollars.
We have an annual return of $3.76 presumably for 400 shares = 1504/year.
22280/1502 = 14.83355525965 years worth of divs.

BUT! Could have sold out in '07 for 107/share = 400*107 = 42800 giving an LT gain of 42800-9720(approx) = 33080 LT gain I spose but we aren't told just when the splits occurred so we can't really figure it out can we?

But then hanging on like grim death from '07 to'13 we'd pull in 1502*6 = 9012 divs while the price slips to 80 at the present time giving a cap decline in principle of 42800-32000 = 10800 (7.190413 years worth of divs).

So! to sum up......naw :-)

This post was edited by mxyplx on Wed, Oct 23, 13 at 17:12

RE: Question about stock purchase and stock split

Update time, I think.

Original purchase: 100 shares at $16.64, which later became 400 shares due to stock splits, so original price per share became the original $16.64 divided by four, to be $4.16.

Current price per share ... about $80.00 (though I could have sold some or all of them earlier for something over $100.00 each).

I can live with that.

Originally paid annual dividend of 10 or 12 cents, taxed at lower than usual rate (1).

Where the earlier message went off of the rails:
Annual dividend had risen from the 10 or 12 cents to $3.08 when the share price was over $100.00, and was later raised to $3.48 ... at an even lower tax rate than earlier.

When the share price fell over the cliff, the annual dividend stayed at the same rate for a time, then as share prices began to rise again, was increased again to about $3.76.

Actually, that was a while ago ... it's now $3.84 per share, and if I can arrange to stay alive for several more years, it may go as high as the $4.16 that each share cost me, 46 years ago ... (or maybe my [middle age] kids collect, after I'm gone).

I can live with that, as well ... well, I can as of the present ... but who knows about the future?

I included the matter of the increasing dividends in the earlier message to illustrate to interest-earning addicts the matter that, while, over the long term, stock prices of quality companies tend to rise ... so do the rates of dividends that they pay.

ole joyful

1. Employment earnings (with few offsetting tax credits), or the pension that has in the past ensued for quite a number of people, but these days for fewer and fewer, (with small offsetting tax credits) and interest earnings (with zero offsetting tax credits) ...

... is the kind of income that most folks earn.

When the tax level on dividend earnings was cut even more (while the tax rates for the corporation that had earned the profit also has been going down) ... I said that it was our prime minister taking care of his rich friends.

Which is also not relevant to the issue at hand - but this addendum isn't part of this main story, either, is it?

o j

RE: Question about stock purchase and stock split

Well You have told us what you did but have not compared it an alternative investment plan. So we don't know whether your plan was good, bad or indifferent do we? All we know is that you are rightly or wrongly satisfied with it.

Any economic analysis MUST be a comparison of alternatives.

Your current yield is 3.84/80 = 4.8% giving you 384 $/year for 100 shares.

If you sold that for 80 = 8000 and bot PDLI for 9.76 (current ask) you'd get 820 shares.
Current yield is 6.15% so that'd give you 491 $/yr. (0.15 per share per qtr.)
Your income would increase 491/384 = 28% more income.

Plus PDLI is going up. If you weren't careful you might could sell it for a good gain - buy sumpin else - make even more money. Who'd want to do that. :-)

RE: Question about stock purchase and stock split

Looks as though it's gone up about 25% in the last month or so.

How much farther, do ya figger? Then ... how far down (maybe)?

Have to pay tax at full rate on the dividend. But it only eats up about a quarter of the earnings, it looks like, so coverage looks good.

Some guys at one of my investment groups tell of some high dividend payers, as well - and a number of them are in the low tax rate category available to us.

o j

RE: Question about stock purchase and stock split

It hit a high yesterday of 10.21 and closed today at 8.85. Not so fine huh?
The Thompsen-Reuters high PT is 8 and the mean 7.2. Looks like a blowoff Monday.

I almost loaded up last March at $7 just for the div. 0.60/7 = 8.6% Taxable. I need taxable. Actually I forgot about the stupid stock, then couldn't remember what it was and just this morning I saw it on a sticky note on the front of my spare computer.

Coulda made a good haul on that blowoff.

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