DMCI, Pancake House, Chinabank, Megawide declare Stock Dividends

In the past weeks, several local companies announced that they are distributing stock dividends. Interestingly, all four are issuing stock dividends as a way of raising their company’s capital stock.

Check out the following news excerpts of the dividend announcements.

DMCI Holdings: 400% stock dividend

DMCI Holdings (stock code: DMC) announced on May 5 that it is increasing its authorized capital stock and the way to do this is through stock dividend distribution. DMC plans to raise its capital stock from P6 billion (divided into 5.9 billion common shares and 100 million preferred shares, with P1 par value each) to P20 billion (divided into 19.9 billion common shares and 100 million preferred shares, both with a par value of P1.00 per share). The DMC Board of Directors declared a 400% stock dividend, which translates to 4 common shares for every one common share held. The record and payment dates are yet to be announced.

Pancake House: 100% stock dividend

Pancake House Inc. (stock code: PCKH) is also set to increase the company’s capital stock from P400 million to P1.4 billion. Like DMC, the capital increase will be achieved by way of stock dividends. No word yet on the record date or ex-dividend date, but eligible stockholders will receive a 100% stock dividend. This amounts to 259.21 million new common shares with a P1 par value each.

Chinabank: 8% stock dividend

Stockholders of China Bank (stock code: CHIB) approved on May 8 the declaration of a 10% cash dividend or P1.00 per share for a total of P1.59 billion. In addition, it will distribute an 8% stock dividend. The stockholders also approved the increase in the Bank’s authorized capital stock from P20 billion to P25 billion. The stock dividend will cover the minimum subscription and paid in capital requirement arising from the increase in authorized capital stock.

Megawide Construction Corp.: 45.5% stock dividend

On May 14, the Board of Directors of Megawide Construction Corp. (MWIDE) approved the declaration of 750 million common shares stock dividend, with a par value of P1.00, totaling P750 million to be taken from the unrestricted retained earnings of MWIDE as of December 31, 2013. The stock dividend declaration will be submitted for approval by the stockholders in its Annual Stockholders’ Meeting on June 30, 2014 and the record and payment dates will be announced afterwards.

What are Stock Dividends?

A stock dividend is a distribution of a company’s income to shareholders in the form of additional shares of stocks. Unlike in a cash dividend distribution, shareholders do not receive actual cash, instead, they receive additional shares of the company either from previously unissued stocks or from an increase in the company’s authorized capital stock.

Stock dividends are usually announced in percentage form, and the percentage represents the number of shares the stockholder is entitled to receive. For example, In the case of Pancake House (PCKH) which announced a 100% stock dividend, a shareholder owning 10,000 PCKH shares will receive an additional 10,000 shares — totaling 20,000 PCKH shares all in all after the distribution.

As for Megawide Construction Corp. (MWIDE), the 45.5% stock dividend distribution means that if you originally have 100,000 shares of MWIDE, you are entitled to receive 45,500 shares more.

Stock Dividends — good or bad?

Some shareholders view stock dividends favorably because they get to receive their share in the company’s income. Technically, the stock dividends are not consumable earnings yet but stockholders can instantly sell these shares in the stock market and convert them to cash.

In addition, shareholders hope that, because stocks were issued instead of cash dividends, cash that is retained in the company is reinvested into the business, producing more profits and further maximizing shareholder value in the long run.

Those opposed to the idea of stock dividends, on the other hand, argue that at the time of distribution, there really is no income given to shareholders since stock prices typically decline to compensate for additional shares issued. Declaration of stock dividends do not affect the company’s market capitalization, thus, when more shares become available, the stock price will have to fall.

Stock Dividend issuance and stock price dilution

To illustrate the dilution in stock price, assume that a company has 1 million shares outstanding trading at P10 each. Its total market capitalization (computed as stock price times number of shares outstanding) is P10 million. If the company distributed 5% stock dividend, a total of 50,000 new shares will be issued. After the distribution, the company will have a total of 1.05 million outstanding shares.

Since there is no change in capitalization (still P10 million), the stock price will have to fall in order to compensate for the additional shares in the market. Its new stock price can be computed as follows:

Market capitalization / Total number of shares = New stock price after stock dividend distribution

In the case of our example:

P10 million / 1.05 million shares = Adjusted stock price of P9.52 per share

As can be seen in the computation, the issuance of stock dividends will cause an instant dilution of stock price from P10 to P9.52.

Regardless whether an investor views stock dividends as positive (distribution of share of income) or negative (causing price dilution), the real benefit of stock dividends can only be felt at a later time, once stock prices have appreciated and shareholders can now sell those additional stocks received at much higher prices.

Must read these other awesome, educational posts!

[unordered_list style=”arrow”]


About the Author

PSEi support seen at 6,200 and 6,000 amid weaker Peso

In a not-so-surprising move, the U.S. Federal Reserve (Fed) yesterday raised interest rates by 75 basis points (bps) or 0.75% in a bid to tame rising inflation in the United States. This was the third consecutive 0.75% rate hike by the Fed, which brings the federal funds rate, the central bank’s benchmark interest rate, to ... Read more

Official SWIFT Code of BDO, BPI, Metrobank, Philippine banks

When sending cash remittances or wire transfer to a bank account in the Philippines (such as BDO, BPI, Metrobank, Landbank, DBP, etc.), you’ll surely need the SWIFT Code of the bank. Look no further because you can find all the SWIFT Codes you need in this list! Make sure you’re using the right bank code ... Read more

How to Waive your Credit Card Annual Fee (BDO, BPI, Metrobank, RCBC, Citibank, UnionBank)

Without a doubt, one of the most annoying fees that credit cardholders have to pay is the annual fee. Majority of cardholders are familiar with this fee and majority of us likely pay this grudgingly year after year after year. In the case of my credit card with BPI (Bank of the Philippine Islands), I’m ... Read more

Why Filipinos do not become business owners or entrepreneurs

For a majority of Filipinos, entrepreneurship does not seem to be a typical, expected path. This is not surprising, considering that in school, students are primarily taught to become employees after graduation. Students train for years to become staff workers, reporting to a supervisor, and just waiting to receive their wages or salaries every month. ... Read more

My experience investing in Mutual Funds in the Philippines

I started investing in mutual funds when I was 22 years old. As an Overseas Filipino Worker (OFW) then, I was fortunate to be able to save some money at that young age because of my work abroad. One time while I was on vacation in the Philippines, I saw a large billboard in EDSA ... Read more

Income Tax Tables in the Philippines (2022)

The Philippines’ new tax reform bill, known as TRAIN or Tax Reform for Acceleration and Inclusion, was signed into law on December 19, 2017 and its implementation began on January 1, 2018. What are the new income tax rates under the TRAIN law? How will TRAIN affect income taxes of individuals and corporations? How is the ... Read more

PSE Stocks Performance under each Philippine President (1987-2021)

Did you know that Philippine stocks were able to achieve an astounding growth of 800% in a span of 30 years? From 1987 until 2018, the Philippine Stock Exchange index (PSEi) rose from 1,000 points to a peak of 9,000 points — generating a return of 800% over 30 years. (The PSEi is an index ... Read more

SSL 2022: Salary Increases for Teachers, Nurses, Gov’t Employees

Good news to all government employees! There’s a new round of salary increases beginning January 1, 2022! Millions of employees of the Philippine government — including public school teachers, nurses and staff of government hospitals, and workers in local and national government agencies, etc. — will be getting an automatic salary adjustment this 2022 under ... Read more

PSE Trading Hours in 2022: What time open, when closed?

Before you take the plunge into stock trading and investing, make sure you understand what stocks are and how the Philippine Stock Exchange (PSE) operates. Unlike other investments that are relatively safe, stock trading is risky and loss of money is a possibility. So before you deep dive into the exciting world of stock trading, ... Read more

Price Floor and Price Ceiling of PSE Stocks

Trading bands in the PSE come in two forms: Price Ceiling, or the upper price limit, and Price Floor, or the lower price limit.

1 thought on “DMCI, Pancake House, Chinabank, Megawide declare Stock Dividends”

Leave a Comment