Mr. Banker answered my queries and below was his reply:
WEEKEND NOTES
*A number of posts back, I wrote that there was a long list of firms that have declared stock dividends some time ago. Their ex-dates and payout date announcements however have remained under TBA for several months now.
*LR did come out with the details to its 20% stock dividend payment recently. Today, MBT followed suit. Hopefully, we will get to read announcements by the others like SECB (20%)…BRN (25%)…CPG (25%)…PSE (20%)…ABA (10%) and ATN (2%) in the coming days.
*MBT’s 30% stock dividend details had Aug 29, 2013 as its ex-date and Sep 16, 2013 as its payment date. That means that you must be the holder of its shares at least on the opening bell of its ex-date of Aug 29 to be entitled to the stock dividends on payment date. From then on, your entitlement will be there even if you sell your original shares on the very first second of trading at ex-date.
*You cannot sell, of course, your stock dividends on ex-date. This is because there are no stock dividend shares yet to sell. Your shares shall only be there when they are recorded under your name on payment date of September 16.
*I did receive today a pm from one of our FM friends on the MBT stock dividend announcement. Let me just post my reply here in the thread so that other opinions can also be shared that may be different from mine.
*Here is what our friend wrote:
Mr. Banker,
Good afternoon. I am Xxxxxxx Xxxx, a beginner on stocks and a follower of your thread.
I have bought MBT @ 110.00price on July 17th and just read their disclosure on their 30% stock dividend release.
May I ask your help on how is it gonna affect MBT in the following weeks?
Also, would you recommend adding some more shares just to avail that 30%?
Thank you very much Mr. Banker.
*Here are my thoughts on his queries. In theory, stock dividends do not increase the value of one’s investment in a firm. While investors’ shares increase in number, the market capitalization of the firm remains the same. Market sentiment and company earnings are the ones that have more relative impact on the listed company’s market price.
*MBT’s behavior in the coming days till the day before its ex-date shall be determined much by market sentiment towards to the stock. Today, it bucked the general red trend as it rallied back from intraday lows to close at least positively by +P0.10. That looks like positive sentiment to me.
*Yes, it might be because of the stock dividend details announcement that many have been waiting for. A 30% stock dividend is significant in reducing the future average cost of acquiring MBT shares. A reduction in price increases market attractiveness from retail investors. To long term holders, the stock dividends also improves dividend yields if one assumes that MBT will maintain its current P1.00 cash dividend payout per share.
*Thus, my read is that if OVERALL market sentiment is positive or …at least neutral…till the day before MBT’s stock dividend ex-date, MBT should likely still improve on its current price. This is also because it is currently trading at the lower end of its historical trading price range. But if OVERALL market is spooked for whatever reason, that would be a different story.
*On ex-date, MBT’s price will however be adjusted before opening bell. If such price before ex-date is P112…purely as an example…the adjusted price that one will see under “previous price” will be P86.15.
*Using the example above, will it trade higher than 86.15 on ex-date? Nobody knows…or more truthfully, I don’t know. It all depends on market sentiment on such date.
*Will I recommend to our friend adding more shares to avail of the 30%? My answer is that it is still so many days away from Aug 28…the day before ex-date. With the current volatility in markets, personally I will make that decision for myself to add or not closer to ex-date. At such time, I shall be adding if overall market sentiment is positive or at least neutral considering I do like the upside on MBT shares.
A pleasant weekend to all of us !!!
*A number of posts back, I wrote that there was a long list of firms that have declared stock dividends some time ago. Their ex-dates and payout date announcements however have remained under TBA for several months now.
*LR did come out with the details to its 20% stock dividend payment recently. Today, MBT followed suit. Hopefully, we will get to read announcements by the others like SECB (20%)…BRN (25%)…CPG (25%)…PSE (20%)…ABA (10%) and ATN (2%) in the coming days.
*MBT’s 30% stock dividend details had Aug 29, 2013 as its ex-date and Sep 16, 2013 as its payment date. That means that you must be the holder of its shares at least on the opening bell of its ex-date of Aug 29 to be entitled to the stock dividends on payment date. From then on, your entitlement will be there even if you sell your original shares on the very first second of trading at ex-date.
*You cannot sell, of course, your stock dividends on ex-date. This is because there are no stock dividend shares yet to sell. Your shares shall only be there when they are recorded under your name on payment date of September 16.
*I did receive today a pm from one of our FM friends on the MBT stock dividend announcement. Let me just post my reply here in the thread so that other opinions can also be shared that may be different from mine.
*Here is what our friend wrote:
Mr. Banker,
Good afternoon. I am Xxxxxxx Xxxx, a beginner on stocks and a follower of your thread.
I have bought MBT @ 110.00price on July 17th and just read their disclosure on their 30% stock dividend release.
May I ask your help on how is it gonna affect MBT in the following weeks?
Also, would you recommend adding some more shares just to avail that 30%?
Thank you very much Mr. Banker.
*Here are my thoughts on his queries. In theory, stock dividends do not increase the value of one’s investment in a firm. While investors’ shares increase in number, the market capitalization of the firm remains the same. Market sentiment and company earnings are the ones that have more relative impact on the listed company’s market price.
*MBT’s behavior in the coming days till the day before its ex-date shall be determined much by market sentiment towards to the stock. Today, it bucked the general red trend as it rallied back from intraday lows to close at least positively by +P0.10. That looks like positive sentiment to me.
*Yes, it might be because of the stock dividend details announcement that many have been waiting for. A 30% stock dividend is significant in reducing the future average cost of acquiring MBT shares. A reduction in price increases market attractiveness from retail investors. To long term holders, the stock dividends also improves dividend yields if one assumes that MBT will maintain its current P1.00 cash dividend payout per share.
*Thus, my read is that if OVERALL market sentiment is positive or …at least neutral…till the day before MBT’s stock dividend ex-date, MBT should likely still improve on its current price. This is also because it is currently trading at the lower end of its historical trading price range. But if OVERALL market is spooked for whatever reason, that would be a different story.
*On ex-date, MBT’s price will however be adjusted before opening bell. If such price before ex-date is P112…purely as an example…the adjusted price that one will see under “previous price” will be P86.15.
*Using the example above, will it trade higher than 86.15 on ex-date? Nobody knows…or more truthfully, I don’t know. It all depends on market sentiment on such date.
*Will I recommend to our friend adding more shares to avail of the 30%? My answer is that it is still so many days away from Aug 28…the day before ex-date. With the current volatility in markets, personally I will make that decision for myself to add or not closer to ex-date. At such time, I shall be adding if overall market sentiment is positive or at least neutral considering I do like the upside on MBT shares.
A pleasant weekend to all of us !!!
You may check him out together with his partner Surfer on their own thread at Finance Manila entitled:
Surfer's Bags and Mr. Banker's Notes.
Cheers!
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