Corporate actions and their effects on price movements!

Let's explore these actions to understand their effects and the essential considerations for shareholders.

Investors usually consider both fundamental and technical factors when making an investment in any company. Since corporate actions directly impact share prices, they are the most important factors that no investor should ignore. For a variety of reasons, a business can undertake a number of corporate actions. Let's explore these actions to understand their effects and the essential considerations for shareholders. 

Dividend - A company is able to distribute a portion of its profit as a dividend to its shareholders when it generates surplus profit. Stock prices typically rise following the dividend declaration date as investors are willing to pay more for the stock in order to receive dividends. Prior to the ex-dividend date, investors who buy shares are eligible to receive the dividend. 

Bonus Issue - When a company offers free shares to its existing shareholders, it is known as a bonus issue. The shares are issued to the shareholders in a specified ratio to the shares held by them. Investors must know the ex-date and record date to benefit from the bonus issues.  

Stock Split - When a company splits its stock, it reduces the face value of each share by a pre-determined ratio and thereby provides extra shares to its existing shareholders. A stock split is frequently carried out when a company's stock price increases to the point where it becomes difficult for small investors to purchase shares. As a result, such split shares often experience an upswing owing to the reduction in the face value of the stock.   

Share Buyback - When a company buys back its own shares from the open market, it is known as a share buyback. Since the company is buying the shares at a premium to their market value, all shareholders profit from the buyback.