3 Factors Affecting Share Prices That Most Stock Investors Do Not Know

3 Factors Affecting Share Prices That Most Stock Investors Do Not Know

By Zainul Anuar

Certainly, there are many factors affecting share prices. However, many beginners are focusing too much on the external factors than what can happen from accounting perspective. Before you think you get cheated next time, spend time to read this article very carefully.

Dividend Effect

I love dividend as much as you do, but apparently, it does not comes for free. Simply because, the share price drops in the same value as the dividend paid after the ex-date. For instance, if Wal-Mart Stores Inc. decided to distribute $1 per share as dividend to its shareholders, its stock price will generally drops from $49 to $48 per share after the ex-date.

Bonus Issue

Bonus issue is additional shares given by the company to its existing shareholders. By doing so, the company is able to reinvest the dividend cash for better earnings growth. In fact, this is another way for the company to maintain its price at cheaper rate without splitting the stocks. Ideally, the stock price drops the same ratio of bonus issued. For instance, if the company is giving one new share for each four shares own by the shareholders, the price will drop by 20%.

Warrants Exercise

With warrants, you have the right to buy shares from a company after the exercise date at specified price. As a result, its earnings will be diluted as more shares are sharing the same earnings pie. In general, the share price drops the same proportion of the number of exercised shares. For example, if the exercised share is 10% of the existing number of shares, the stock price will normally drops by 10% as well.

Unfortunately, unlike stock split, these factors are diluting the earnings per share (EPS) of the stock, which in turn will adjust its price accordingly. Although long term investors do not care much about it, stock traders (esp. swing traders) should consider these factors seriously. You can find out more factors affecting stock prices at http://www.Stock-Investment-Made-Easy.com/what-moves-the-stock-market.html

Zainul Anuar is the founder and CEO of Stock-Investment-Made-Easy.com, a step-by-step guide to stock investing for beginners website. Find out exactly how you can make money in stock market and become financially free eventually; even if you have day job to take care of, and download your FREE eBook at http://www.stock-investment-made-easy.com/easy-stock-tips.html

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