A lot of people are asking what to do if they get a fractional share from a stock dividend.
I’ll give you an example so you’ll understand where the question is coming from.
GTCAP has announced an 8% stock dividend with an Ex-Div Date of July 3, 2019. Record Date is August 1, 2019.
If you have 1,000 shares of GTCAP, you’ll get additional 80 shares on the Record Date. That’s a whole number.
There’s no problem trading whole numbers, especially that 80 is divisible by 10 (number of shares per board lot).
Whole numbers are tradable in the odd lot board, too.
What if you have 530 GTCAP shares?
Will you get 42.40 shares? What will you do to the 0.40 fractional share? Where are you going to trade that? Will someone buy 0.40 share?
The questions go on and on.
The answer is simpler than what you might think.
I was able to confirm it from Mr. Paul Michael Angelo, Equity Research Analyst of First Metro Securities, that you will not get 42.40 but 42 shares.
It will be rounded down.
This is to avoid fractional shares.
You no longer have to worry about what do or where to sell fractional shares because you won’t get one.
There are some brokers in the US that allow trading of fractional shares. I am yet to know one here in the Philippines. So to avoid dealing with that dilemma of having fractional shares, brokers round down fractional shares.
This applies to all similar scenarios involving stock dividends regardless of who the dividend-issuing company is.
Now that you know the answer to this question about fractional shares, I’ll give you some bonus pieces of information related to dividends.
I always get asked, “Sir, will I receive dividends if I buy before, on, or after the Ex-Div Date? What if I sell before, on, or after the Ex-Div Date?”
Once and for all, let’s answer those questions regardless if you will buy or sell before, on, or after the Ex-Div Date.
Will You Receive Dividends If You Buy Before, On, or After the Ex-Div Date?
If you will buy before the Ex-Div Date and keep those shares at least until the Ex-Div Date, those shares will receive dividends.
If you will buy either on or after the Ex-Div Date, those shares will NOT receive dividends.
Will You Receive Dividends If You Sell Before, On, or After the Ex-Div Date?
If you will sell before the Ex-Div Date, those shares will NOT receive dividends.
If you will sell either on or after the Ex-Div Date, those shares will still receive dividends.
If you are a visual learner, I’ve created a chart for you.
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I am Jaycee De Guzman, founder and Chief Executive Officer of Equilyst Analytics, Inc. My mission is to simplify stock trading and investing in the Philippine Stock Exchange using my proprietary evergreen strategy in stock trading and investing. My vision is to level up at least 1,000,000 Filipino stock traders and investors by 2030. I will make it happen.