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Corporate action is any step taken by the management team which affects the security issued by a public company. Generally speaking, a publicly traded company tries to maximize the shareholders value by taking such steps. Common types of corporate actions which enhance shareholders wealth include dividend distribution, bonus issues, stock splits, share buybacks, rights issue and corporate restructuring via spin offs, mergers and acquisitions. Keeping a watch on these management actions can enhance portfolio returns as stock price normally follows a well defined path post the announcements. We understand that as a shareholder you would like to keep track of various corporate actions on your portfolio stocks. Please use the following dashboard for the same. Just in case you want to explore some really interesting data points about various types of corporate actions, you can continue reading. कसम से आँखे खुल जाएँगी तुम्हारी।
When you purchase stock of a particular company you are basically buying ownership into that company. Although the ownership percentage is very less, still management actions affect our profit percentage both in terms of stock price movement and corporate action taken (dividends, stock splits, bonus, share buyback etc). Having understood the role of corporate actions on a high level, let me ask you a question. Have you ever thought about investing based on corporate actions? And if your answer is like
मतलब ऐसा बिलकुल इम्मेडिएटली नहीं सोचे हैं पर सोचेंगे
then please allow me to enlighten you. Let me start with reciting the real motivation behind dividend investing. For long term investors, a lot of dividend yielding stocks offer great investment opportunities. These stocks act as safe haven as they provide good returns with greater degree of safety. Even in volatile market conditions, an investor gets a decent return on investment in the form of perpetual dividends. The dividends are paid independent of the direction of stock movement generating decent return without losing the ownership of the stock. On top of that, it's liberating in terms of how much effort and time you spend on research.
Sounds convincing? If yes then let's spice up this gyan with some real life data. Here is an interactive table listing the count of different types of corporate actions for different companies since 2008. You can sort the table by clicking on the column headers and can also click on rows to get date wise details of all the corporate actions. You can also use the search box to search the table data.
Looks interesting, but what to do with this data as it has almost all the names listed on the exchanges. If this is what you are thinking then let me explain what exactly to look for in this data. The table above lists the corporate action history of companies since 2008 (you can click on each row to check the year). Needless to say that it's mostly about dividends as that's the most famous and rewarding corporate action. Now hear this - any company with long and continuous upward dividend history is inherently a quality company. Why? Because dividends are paid from profit. So the company has been earning profit and doing it for a long time. It survived the test of time so it must see the future too. If you agree with this common sense fact, I assume you already have guessed the next step which is to do a quick analysis to ascertain if the highest paying dividend (by number and amount) companies have interesting price up trend over a longer time frame or not. If you find names where price is up trending then you can safely conclude that targeted dividend investing could be a good idea.
Moving ahead, let's try to find out the best among equals with respect to dividend payments. The segregation will be based on calculating the dividend yield. If you don't know how dividend yield is calculated, here is the formulae:
Dividend Yield = Annual Dividend per share / Latest share price
Dividend yield basically tell you how much you earn from stock dividends compared to the price you have paid for the stock. Here is a table that lists the latest dividend paid, latest price of stock and latest dividend yield of all the companies who have paid dividends in current or last year. You can sort the table by clicking on the column headers and can also click on rows to get date wise details of all the corporate actions. You can also use the search box to search the table data.
Oooo..this is nice. We have some really interesting names here at the top. Feel free to play around with the data. I am damn sure you will find some names missing from your long term portfolio. To reiterate, you have to look for companies with moderate to high dividend yield with up trending prices in a longer time frame.
ऐसे स्टॉक्स डबल मजा देंगे - Dividend भी और Capital Appreciation भी
If you are curious about the industries which have been giving dividends for long and in large numbers while simultaneously comparing which are top performers within the sector, then you surely have traits of a good researcher. So here is a table that shows industry wise dividend history. It lists top industries who have been giving dividends consistently along with total number of companies that have been giving dividends, total count of dividend, total dividend amount and total count of other corporate actions. Again the table is fully interactive and you can do your own things by clicking on the column headers and rows.
So what are the insights you can draw from the above table? The key questions you need to find the answer to are:
- Is dividend distribution a characteristic of progressive industry?
- How does the cyclical and defensive sector behave with respect to corporate actions?
- Which are the leading companies within the industry with up trending dividend and price history?
Try to answer the questions in order and you will surely unearth some gems worth inclusion in your long term portfolio.
Enough on dividends... Lets add other types of corporate action like bonus, stock split and buy backs into our analysis. The table below lists companies having all types of corporate actions - idea is to check how the companies with maximum type of corporate action have performed historically.
If you are interested in exploring companies who have declared dividend and bonus for sure then you can do the same below.
Just in case you want to explore more about various types of corporate actions, what they mean and their effect on share prices, you can continue reading.
Corporate actions and stock price movement
Through Dividend declaration company management distributes a part of company earnings to the shareholders.
How to benefit from this news – Let’s say the stock price for company A is Rs 100 today. There is a dividend declaration of Rs 2/share. That means each stockholder will get Rs 2/share as cash if he holds stocks of company A on or before Ex-dividend date. As markets react to every good news, the stock price of company A may reach Rs 102 or even higher before Ex-dividend date.
As dividend declaration normally results in stock price appreciation, make a list of good dividend declaring companies and figure out in which quarter and round what date they declare dividends. Invest in them before the dividend declaration date and benefit from price appreciation.
There are four important dates related to dividend declaration and payment which investor should take into consideration
- Dividend Declaration Date – Dividend is announced by the company board on this date.
- Ex-dividend date - On and after this date the stock trades without dividend. For claiming the dividend investor has to buy the stock one day before the ex-dividend date. If the stock is bought on or after the ex-dividend date, investors will not get the dividend.
- Record date - This is the date on which the company checks its records to find out the shareholders of the company. An investor must be listed as a shareholder to claim dividend payout.
- Dividend payable date - This is the date on which the company sends the cheques for the dividend payout due to the shareholders.
Share Buy Back
Share Buyback is basically re-acquisition of companies own shares. Bought back shares are not available for trading. Buy back’s reduces the number of shares and hence increases earnings per share.
Playing buyback is slightly tricky and you need to understand the company’s fundamentals before making a decision. If based on your fundamental research you find out that a company is undervalued and at the same time company management announced a buyback offer it's wise to invest in that stock. When the market condition improves you will reap a handsome benefit out of this investment.
Stock Split/Reverse Stock Split
This is a step to improve the liquidity of stock. If for some reason the stock price of a company is too high or too low and hence trades with low liquidity, companies announce stock splits/reverse stock splits to increase the liquidity of stocks. This basically increases or decreases the number of stocks without changing the market cap of the company.
Stock splits/Reverse splits normally increase the liquidity of stocks and now there are more buyers and sellers for the same stock. Normally companies announce splits if they are quite confident about the future growth prospects. One can invest and benefit from this news if the company is a quality company.
This corporate action gives privilege to existing shareholders by offering them to buy additional shares of the company before going to the open market.
Normally a company offers rights issue if it requires additional capital. Investors should study the need for this capital requirement and if he feels the capital invested by the company will be profitable, he should apply for the rights issue if it’s offered at a price which is considerably less than current market price of the stock.
Mergers and Acquisitions
Merger happens when two companies decide to merge and one of them surrenders its stock to the other one. Acquisition happens when one company buys a majority stake in Target Company. There is no surrender of stocks involved here.
Normally whenever a Target Company is acquired the acquiring company has to pay a premium for this purchase which in turn results in increase in stock price of the target company in the short term. As the acquiring company has to pay the premium its stock price decreases in the short term. An investor can use acquisition news to buy into Target Company and sell the parent company in order to gain in the short term.
Disclaimer* - The data on this page comes from what we have in our database and is not complete plus there might be inaccuracy in the numbers shown in the tables and charts above. So use this data for analysis purpose only and do not treat it as any recommendation to trade or invest. Also do a second level check for data accuracy from direct sources like NSE and BSE websites.