How many shares is a 1 yuan stock dividend? An article explaining dividend distribution and ex-dividend/ex-rights

Two Ways of Dividend Distribution: Cash or Stock?

When a listed company turns a profit, it typically returns part of the earnings to shareholders, known as dividends (profit sharing). There are two main methods of dividend distribution:

One is cash dividends (dividend payout), which directly deposit cash into the investor’s account. This method requires the company to have sufficient liquidity on hand and does not increase the total share capital after distribution.

The other is stock dividends (stock issuance), where the company distributes additional shares to shareholders free of charge, increasing the number of shares held by investors, also called “stock split” or “bonus shares.” This method has low cash flow requirements, as long as the distribution conditions are met.

Key Question: How many shares is 1 yuan of stock dividend?

Here, “1 yuan” usually refers to the dividend ratio, such as “1 share for every 10 shares” or expressed as “dividend ratio 0.1.” For example, if an investor holds 1,000 shares and the dividend ratio is 10:1, the stock dividend received would be 100 shares. The specific calculation is: number of shares ÷ denominator of the ratio = shares received (1000 ÷ 10 = 100 shares).

Examples of Calculating Stock and Cash Dividends

Scenario of Only Stock Dividends

Suppose Cathay Financial announces a 1-for-10 stock dividend, and an investor holds 1,000 shares:

• Stock dividend received = (1000 ÷ 10) × 1 = 100 shares
• Total shares after dividend = 1000 + 100 = 1100 shares

Scenario of Only Cash Dividends

Suppose Hon Hai announces a cash dividend of 5.2 yuan per share, and an investor holds 1,000 shares:

• Cash dividend received = 1000 × 5.2 = 5200 yuan
• After deducting 5% personal income tax, actual received = 5200 × 0.95 = 4940 yuan

Mixed Distribution Scenario

If the company distributes both stock and cash dividends (e.g., 1 stock for every 10 shares plus 1 yuan cash), the investor ultimately receives:

• Stock dividend: 100 shares
• Cash dividend: 4000 yuan

When Are Dividends Paid? Complete Process Explanation

Listed companies typically adopt annual or quarterly dividend distribution modes. The Taiwanese stock market mainly distributes dividends annually, while U.S. stocks mostly distribute quarterly. The specific payout date depends on the financial report disclosure date.

The full dividend process includes:

1. Announcement Date: The company announces the dividend plan
2. Record Date: Confirms shareholders eligible for dividends; shareholders must hold shares before or on this date
3. Ex-dividend and Ex-rights Date: Usually the trading day after the record date; after this date, newly purchased shares do not enjoy the current period’s dividends
4. Dividend Payment Date: Officially distributes dividends to shareholders

Trading can still occur on the ex-dividend/ex-rights date, and selling shares does not affect dividend entitlement.

Deep Mechanisms and Impact of Ex-dividend and Ex-rights on Stock Price

What is Ex-dividend?

After a company pays cash dividends, its total net assets decrease accordingly, and the net asset value per share also declines. With no change in share capital, the stock price will decrease proportionally, a process called ex-dividend.

Ex-dividend price formula: Ex-dividend price = Closing price on record date - per-share cash dividend

For example: If Company A’s record date closing price is 66 yuan, and the dividend per share is 10 yuan, the next day’s ex-dividend price is 66 - 10 = 56 yuan.

What is Ex-rights?

When a company distributes stock dividends, the total share capital increases, but the total market value remains unchanged, causing the value per share to decrease and the stock price to fall accordingly. This process is called ex-rights.

Ex-rights price formula: Ex-rights price = Closing price on record date ÷ (1 + dividend ratio)

For example: If Company A’s record date closing price is 66 yuan, and it distributes 1 share for every 10 shares (dividend ratio 0.1), the next day’s ex-rights price is 66 ÷ (1 + 0.1) = 60 yuan.

Ex-rights and Ex-dividend Price in Mixed Cases

If both cash and stock dividends are distributed simultaneously:

Ex-rights and ex-dividend price = (Closing price on record date - per-share cash dividend) ÷ (1 + dividend ratio)

For example: If Company A’s record date closing price is 66 yuan, and it distributes 1 share for every 10 shares plus 1 yuan cash, the ex-rights and ex-dividend price is (66 - 1) ÷ (1 + 0.1) = 59.09 yuan.

Adjusted Price and Fill-Price Handling

After ex-rights and ex-dividend, stock prices may show gaps. To maintain continuity, adjusted prices are used:

• Forward adjustment: Converts prices before ex-rights/ex-dividend to current prices, shifting the left end of the K-line downward
• Backward adjustment: Converts prices after ex-rights/ex-dividend to earlier prices, shifting the right end of the K-line upward

Post-adjustment, stock prices may either:

Fill the gap: Price rises back to pre-ex-rights/ex-dividend levels, increasing investor wealth

Remain below: Price continues to decline, leading to potential losses

Stock Dividends vs. Cash Dividends: Which is Better?

Both dividend methods have advantages and disadvantages, requiring analysis from both investor and company perspectives.

From an Investor’s Perspective

Advantages of cash dividends:

• Realized income, funds available for use
• No issuance of additional shares, no dilution of ownership

Disadvantages of cash dividends:

• Subject to personal income tax, rate depends on holding period
• Limited payout amount, fixed income

Advantages of stock dividends:

• Long-term holding benefits; if the company grows well, stock appreciation yields higher returns than cash dividends
• Tax deferral, no immediate tax payment
• Suitable for long-term investors seeking compound growth

Disadvantages of stock dividends:

• Increased shareholding may cause psychological pressure
• No immediate cash income

From a Company’s Perspective

Paying cash dividends requires sufficient earnings and cash flow; after distribution, available liquidity decreases, potentially restricting business expansion and project development, especially for companies with tight liquidity.

Distributing stock dividends exerts less pressure on cash flow, making it more suitable for fast-growing but cash-strapped companies.

In the long run, if the company has good growth prospects, stock appreciation typically yields higher returns than cash dividends.

How to Check Dividend Records?

Investors can check listed company dividend information through:

1. Company Official Website Companies publish dividend announcements detailing distribution plans, ex-dividend/ex-rights dates, etc. Some large companies also compile historical dividend records for reference.

2. Stock Exchange Official Website For example, in Taiwan, you can check the Taiwan Stock Exchange’s market announcement section for ex-rights/ex-dividend notices and calculation tables, covering detailed dividend data since May 5, 2003.

Summary

Dividends are an important way for companies to reward shareholders. Stock dividends and cash dividends each have pros and cons: in the short term, cash dividends are more direct; in the long term, stock dividends can offer higher returns if the company develops well. Investors should choose flexibly based on their investment horizon and capital needs. Understanding the ex-rights/ex-dividend mechanism helps investors view price changes more rationally and avoid short-term volatility concerns.