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Good day subscribers thank you so much for joining me today i am jeremy this is a financial education channel in today we’re talking about what is better for you as an investor a stock split a dividend a share buyback what is better i’m gonna give you the kind of the facts behind each of them how each of them could help you in a in a specific scenario and then
I’ll kind of tell you guys what my favorite is and why as an investor in companies the one is my favorite over all the others by far guys so first off we’ve got to understand what a stock split is what is a stock split a stock split is essentially when a company decides that is gonna split its share price so it can bring down its share price to a to a lower amount
So smaller investors can get invested in that and so basically if a stock’s $100 right and they want to bring that share price down to ten dollars the next day they can announce a stock split and basically if you own those shares already for every one share you own you’re now gonna have ten shares but your ten shares are gonna be a $10 so equal to what it was for
One share before because one share before was worth $100 so some companies when they get their stock prices really high they do that just so they can get more investors smaller investors involved in the stock apple did this apple stock price at one point was like over $700 a share so they did a 701 stock split so basically for every one share you had before $700
You now had 7 shares at $100 each so now smaller investors could invest because at $700 they might not have been all to invest at $100 absolutely you know all the smaller investors can generally and afford that so that’s what a stock split is a dividend is when a company actually pays you out money to you personally or basically all the shareholders and they pay a
Fixed amount so let’s say that you’re gonna pay $1 a year in dividends so for every 1 share you own you get $1 in dividend so if you own a hundred shares over the course that year you’re gonna get $100 in dividends into your brokerage account and with that money you can do whatever you want you can pull it out you can buy more stock whatever you want to do with that
Money guys so that’s a dividend it’s actually money that’s getting paid out to you from the company so you as a shareholder last one asure buy back a share buyback is so companies can basically use their money their cash on their balance sheet or investments or whatever and buy back their own shares and basically retire those shares now why would a company want
To do that well left shares you have outstanding versus your net income that means you’re gonna have a higher eps a higher eps means more money for the shareholders that you can either pay out in dividends or basically just brings down the p/e ratio so it looks like an even better investment guys so that’s why companies do a share buyback so with that being said
Guys here what is better well a stock split is better if you’re someone that’s such a small investor that you can’t really afford some of these more expensive stocks like a google stock or an apple back in the day for instance or an amazon and as long as i beat seven eight hundred dollars a share so if you only have you know one hundred two hundred three hundred
Dollars to invest you can’t even really buy those shares i’ve heard of companies that you can like buy technically part shares and i don’t know if that’s true or some brokerages allow that most brokers just do not allow that you got to buy at least one share of that stock so if that’s your situation then our stock splits the best thing for you for me personally i
Could care less about a stock split because when i’m investing i’m investing thousands of dollars usually tens of thousands of dollars at a time and there are almost no shares out there that are over ten thousand dollars guys is i can’t think of one share maybe berkshire hathaway but even they have like a separate share that you can buy for like one hundred two
Hundred dollars but i know the berkshire regular shares are like one hundred two hundred thousand dollars for one regular berkshire hathaway share but how many companies actually have a share price that’s in the tens of thousands of dollars or hundreds of thousands of dollars pretty much none it’s like oh point zero zero one percent of the companies out there know
Also i don’t even care about this because like say my first investment ever my first investment ever was two hundred fifty seven dollars even that that that price i could still afford to buy eight ninety nine percent of the companies out there if not more than ninety nine percent of the companies how many companies actually have a share price over $257 i can think
Of maybe five to ten off the top of my head and that’s out of thousands and thousands of companies guys that aren’t a ton of companies that or over that type of price so even if you’re a small investor you can still buy mostly shares so that’s why i don’t personally care very much about stock split but you make because like i said maybe you want to buy those amazon
Those shares but you don’t have enough money yet well if they did a stock split they nelson you could actually afford it guys alright so next one up dividend dividends are nice i like dividends but i don’t love dividends when i first started investing dividends were very important to me they really were i gave companies that had dividends a lot better shot than
Companies that didn’t pay dividends but a dividend can matter if you’re looking for income to come in so maybe you have a lot of money invest in a stock maybe you’re a retiree or something you have a couple hundred thousand dollars in that particular stock you don’t really want to play with stocks you know investing and selling and buying and those kinds of things
You just want to have your money in there collect your dividends if the stock goes up great if the stock goes down a little bit who cares you’re in it for a long time you know five 10 15 years who cares you’re mainly in that stock for the dividends to be paid out to you so you want your three percent of dividends a year so you may be owned let’s say ten thousand
Shares and they pay out two dollars and dividends a year great you get twenty thousand dollars of income basically coming to you just from dividends so if that’s very important to you guys then dividends are certainly a way to go me personally like i said i i don’t really like say it’s great if a company pays a dividend i don’t i don’t look at it as a bad thing if
They pay a dividend i would personally rather be involved with companies that use that cash instead of paying out to their their shareholders use that cash to build out your business to create new products to create new services to build out the business rather than just paying it out to the shareholders guys so that’s my personal belief which is why i don’t really
Care about dividends that much next one up is a share buyback guys this one i do absolutely care about and i love if the company is if the shares of the company are undervalued from is a lot of companies do share buybacks when their stock is not undervalued so when you’re buying your your stock back as a company and an overpriced price you’re basically spending a
Lot more than you should you’re better off just holding that money on your balance sheet at that time so companies that are severely undervalued it’s a brilliant thing to do a share buyback because then you can buy tons of shares at a super cheap price we retire those shares and then your ep s as long as you can hold your net income the same or grow it your eps
Is going to look like it’s exploding just because you’re taking a lot of shares off the market so there’s a lot less shares outstanding to count against that net income so your shares are the shareholder become actually much more valuable at that point because there’s less of them out there so companies that do share buybacks when their shares are undervalued are
Absolutely brilliant in my opinion and i prefer companies that are doing share buybacks i think it’s just a phenomenal thing now like i said if it’s overvalued it’s not a good thing now a lot of the companies i invest in a lot of them happen to be doing share buybacks when i’m buying in which is kind of a sign not only that i believe that companies make undervalued
But the management the board of directors has to approve a share buyback they also believe the shares are undervalued at that point so if they believe it’s undervalued i believe it’s undervalued it’s kind of just like a you know an extra good thing in my in my scenario where not only do i think it’s good undervalued share but then board of directors does you know
These these geniuses they also think is undervalued but like i said guys not all the time they’re right some times are wrong on the share buybacks and they buy back at a really low price and has stock goes lower and they could have bought it a lot lower prices guys but sure buyback is definitely my favorite in my opinion leave me in the comments section what you
Guys preferred you prefer and share buyback on a stock would you prefer dividend would you prefer stock splits or is there a particular share out there that you would love to buy but it’s too expensive right now because you can’t afford to buy this year i would love to hear your guy’s opinion on this leave a thumbs up if you enjoyed this video if you come across
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What is better a Stock Split, Dividend or Share Buyback? By Financial Education