What is effect of split to a security generally

**jinbai** Tue Jun 07, 2005 10:14 am

What is effect of split to a security generally
Blast, I would like to learn something from you. Generally, what is the effect of split to a stock in the long term, usually why the company want to split. The maun reason I ask this question is, one of my holding, CWCO, propose a 2-for-1 split today, it looks like it is good for it. Thanks, and I already get big from you, I would like to learn more.

**blast_investor** Tue Jun 07, 2005 12:55 pm

jinbai,

stock split has no effect in the long term. Usually share doubles and the stock price halfed.

However, in the short term, splitting share is bullish for the short term because traders and investors like the news. People like the idea of owning more shares.

Daytraders and momentum traders sometimes use this information to drive up the price.

Because my approach is long term oriented, therefore, I do not consider splitting as bullish sign in my research for the long run.

**jinbai** Tue Jun 07, 2005 4:59 pm

Thank you very much. This one I was holding almost > 1 year, and I am about to sell it recently. Since it is not quite bullish signal for the long term, i will keep my plan to sell it. BTW, its dividend incease a little bit, is it good for long term.

**RT Wolf** Thu May 04, 2006 9:57 am

A dividend increase can be tough to call without knowing the company you were looking at. If the company can sustain the new dividend, great. It may also be a sign that they do not feel that they can reinvest their profits in their own business effectively enough to produce growth, so the sign of a growing dividend may mean that the company is past its high-growth phase (such as MSFT a few years ago). You need to look at their corporate strategy from here on out.

A dividend increase can also mean that the company is reaching new levels of profitability that they feel can be sustained so they've decided to give the shareholders back some of the money. However, if they simply increased their payout ratio without growing earnings or free cash flow, then you might want to think deeper about that.

HTH and good luck!