Quick Finance Tip - Stock Split

Stock Splits are like stock dividends in that they have no economic effect. Assuming the corporation maintains the same dividend payout ratio before the split, the dividend yield will also remain unchanged.

Stock Splits merely recognize that the stock has risen enough to justify a split to return the stock price to a more "marketable range" (i.e. examples include 2 for 1 or 3 for 1). A Reverse Stock Split increases the share price and reduces the number of shares outstanding (i.e. 1 for 2 or 1 for 3). Idea is to increase the stock price to a more marketable level. Investors typically fray from share prices below a certain level.