To begin, it may pay to define what a stock split is: A stock split is a simple mechanism that a listed company can employ to increase the number of issued shares while keeping its market capitalisation/ valuation the same.
There are a couple of reasons a company may elect to perform a stock split, the chief among them is to increase the liquidity (or accessibility/ tradability) of their stock.
The most popular stock split ratios are 2:1, 3:2, and 3:1. By way of example, if a hypothetical company were to perform a 3-for-1 stock split, its shareholders would be issued an additional two shares for every share they owned before the split. In conjunction with the split, the value of each share would be devalued to 1/3 of its pre-split value. Effectively, the total value of three shares after the stock split should be worth the same value as one share before the stock split.
A reverse stock split is when a company reduces the number of shares available while keeping its market capitalisation/ valuation the same. A company cannot simply remove shares as easily as it can issue new shares. Therefore, with a reverse stock split, a company is forced to revoke all existing shares and issue new shares, proportional to the reduction that the company is pursuing.
A primary reason a company performs a reverse stock split is to avoid being delisted from its stock exchange which may have set minimum share-price conditions on its listees.
Tesla (NASDAQ: TSLA) performed a 5:1 split of its stock in August 2020. At the time, TSLA shares were trading above US $1,300. Tesla CEO Elon Musk believed the EV Company’s shares were too expensive for retail investors, so he reduced its price via a stock split.
Microsoft (NASDAQ: MSFT) has been a serial stock splitter. Since listing on the Nasdaq in 1986, The Software Company has performed nine stock splits, the last occurring in 2003. Consequently, 100 MSFT shares in 1986 would now total approximately 30,000 shares.
The beleaguered General Electric (NYSE:GE) performed a 1:8 reverse stock split in July 2021. Before the reverse stock split, GE shares were teetering around US $12. The reverse stock split meant that GE shares began trading above US $100 per share, a threshold not crossed for a very long time.
Investors acquire Stocks for a variety of reasons. A widespread consideration in stock investing is whether the stock/company you are buying issues dividends. Suppose a Company is a regular dividend issuer. In that case, investors would like to know:
In its most simple form, a dividend is a cash payment made by a company to its shareholders. The payment is derived from a portion of the company's earnings, typically after covering its expenses.
Dividends are typically issued by large established corporations that are cash positive but limited in their opportunities to scale. These corporations seek to return value to their investors via cash rather than increasing their stock price.
Some of the most popular dividend stocks are well-known brands with strong, predictable cash flow or high dividend yield. As a general rule, the riskier the stock, the higher its dividend yield should be to compensate for the risk.
Keep reading to learn about some of the most popular dividend stocks in the US and other major stock markets.
Company: The Coca-Cola Company
Extra Note: The Coca-Cola Company's solid and dependable sales record and healthy profit margins make up for its dividends' relatively low yield compared to other stocks mentioned on this list.
Extra Note: Oligopolies such as US telecommunication companies make attractive dividend stocks for investors. The small pool of competition for these companies means the risks for investors is smaller than for companies that have to rely purely on competitive strengths.
Company: British American Tobacco
Extra Note: While a contentious and vilified industry, tobacco companies have a reputation for charitable dividends. This is why British American Tobacco and Imperial brands remain popular dividend stocks, even with reduced smoking rates in developing countries.
Company: Imperial Brands
Company: Deutsche Lufthansa
Extra Note: Deutsche Lufthansa has temporarily suspended its dividend payments due to global air travel receding to unsustainable levels since the beginning of the Covid-19 pandemic. Before 2020, Deutsche Lufthansa would distribute approximately 20% to 40% of net income in dividend payments to its shareholders.
Extra Note: The original Spanish branch of Telefónica issues dividends twice annually, in June and December of each year. Telefónica engages in several methods to return value to its shareholders, including cash and scrip dividends (i.e., issuing shares in place of a delayed cash dividend).
Company: Novo Nordisk
Extra Note: The Danish Pharmaceutical company's dividend yield is the lowest on this list, yet the company remains an attractive option for investors. The yield, while small, is not altogether inadequate for the industry in which it operates and is seen as tolerable due to the companies domination over diabetic therapies.
Company: BHP Group
Extra Note: Of course, as Australia dominant industry, two of the country's most popular dividend stocks are from companies operating in the mining industry. The attractive yields signify the sector's risk to commodity price movements beyond the control of the miners.
Company: Rio Tinto
Company: Japan Post Bank
Extra Note: One of Japan's favoured dividend stocks, Japan Post Bank seeks to return 50% to 60% of its retained earnings in the form of dividends. By Japanese standards, yields of ~5%, of which Japan Post Bank conforms, is higher than the market average.
Q3 earning season is currently underway, and most high-profile companies are delivering revenue beats. Yet, Q3 revenue is not the only thing investors are watching. Investors are interested in revenue growth, customer acquisition, and pace of growth alongside the balance sheet. Inflationary and supply chain pressures that may affect the outlook of reporting companies are an additional concern for investors.
Tesla's Q3, 2021 earnings were, once again, record-setting for the Company. The Company is increasing sales and has stated it is on track to "achieve 50% average annual growth in vehicle deliveries" at a time when chip shortages are hampering other automakers ability to do so. Improving gross margins (up to 30.5%) was also a significant factor in Tesla performance in Q3.
TSLA shares since earnings report:
The popularity of Netflix's series Squid Game hadn't completely filtered into the Company's finances at the time of its Q3, 2021 earnings report. Yet, Netflix delivered a favourable report, with revenue coming in on par and subscriber growth beating expectations. Squid Game IP is estimated to be worth $900 million to Netflix and should help boost its Q4 earnings, which typically get a seasonal bump anyway.
NFLX shares since earnings report:
Johnson & Johnson's Q3 earnings-per-share beat expectations, with revenue climbing 10.7% from the previous corresponding period. J&J increased its (bottom-end) revenue guidance for the full year from $93.8 billion - $94.6 billion to $94.1 billion to $94.6 billion. J&J noted that its Covid vaccine would be responsible for $2.5 billion at years end and $502 million of its Q3 revenue.
JNJ shares since earnings report:
PG beat revenue estimates, increasing sales revenue by 5% over the last quarter, but expects to fall short of 2020 revenue. The consumer goods Company also noted that rising producer costs, particularly as it relates to shipping and raw commodity prices, has already had and is going to continue to have a larger-than-anticipated effect on its earnings. In response, PG has begun raising the prices of some of its premium products as a quick remedy to help offset its rising costs.
PG shares since earnings report:
There are plenty more juicy earning reports due next week.