What is the impact of corporate actions on stock prices?
The corporate actions that impact a company's stock price mainly include:
- Dividends: Dividends are a portion of profits distributed to shareholders. They are paid as a percentage of the face value of a share.
After the ex-date of an announced dividend, the stock price usually falls in proportion to the dividend to be paid. This is because dividends are issued as a cash payout and are no longer held as profits/reserves with the company. Hence, the stock price adjusts based on this. In general, dividends do not have a considerable impact on a stock's price. However, a significant change can be observed in the case of special/abnormal dividends, which are larger than regular dividend payouts.
- Rights Issues:
- Bonus Issues: Since the market capitalisation of the company and the face value of the shares do not change, the stock price tends to fall to the extent of the issue.
- Stock Splits: Here, the market capitalisation of the company remains unaffected and the face value of the shares changes in proportion to the split.
- Buybacks: In a buyback,
Still need help? Create Ticket