Stock Splits - Canadian Banks

[j831robert]

Was tempted to divesify my bank stock holdings until I looked at the prices - certainly not a poor man's game anymore and I'm 'forced' to buy their preferreds instead of their common stocks if I want 'more bang for my buck'. I'm wondering what would trigger some of the more expensive banks to again venture into splitting their common stocks into a more affordable level ? Ergo, my BMO holdings were split 2:1 in 1993 and again in 2001.

[adrian2]

Was tempted to divesify my bank stock holdings until I looked at the prices - certainly not a poor man's game anymore and I'm 'forced' to buy their preferreds instead of their common stocks if I want 'more bang for my buck'.

Huge red herring. As long as you can afford to buy a single share, the price is a non issue. With most brokers, whether you buy 1 share, 67 or 987 shares you pay the same commission. IIRC, Canadian banks are priced under $100, surely you don't want to invest less than that.

[randomwalker]

Was tempted to divesify my bank stock holdings until I looked at the prices - certainly not a poor man's game anymore and I'm 'forced' to buy their preferreds instead of their common stocks if I want 'more bang for my buck'.

Huge red herring. As long as you can afford to buy a single share, the price is a non issue. With most brokers, whether you buy 1 share, 67 or 987 shares you pay the same commission. IIRC, Canadian banks are priced under $100, surely you don't want to invest less than that.

If one simply wants a diversified holding of Canadian banks one might look at BMO;s TSX Equal Weight Banks Index ETF symbol (ZEB)

[j831robert]

Sorry fellahs! I own 3000 shares of BMO as a result of the two spits - the point I was trying to make (poorly obviously) is that preferreds are available around $25-27 while common shares are anywhere upwards to $80 each. I suspect that "John Q" can't afford to buy 1000 shares at $80 while he might stretch to $25K for 1000 shares and, like me, be willing to hold until the shares and/or dividend increase in value. The banks sing a song about 'the common man' but their pricing takes them out of his reach.

[deaddog]

I own 3000 shares of BMO as a result of the two spits

Boy you gotta be old. BMO hasn't split since 2001 and i can't find where they split before that.
You don't have to buy in 1000 share lots, If you want to buy $25,000 worth of stock you can buy an odd number of shares. It doesn't matter if you have 1000 shares or 427 shares as long as you have $25000 worth of stock. A 5% dividend will give you the same cash each year.

[adrian2]

The banks sing a song about 'the common man' but their pricing takes them out of his reach.

There is no reason for sticking to 1000 shares for a buy. You can't buy fractional shares, but any integer (non-zero natural, for math purists) number would work.

[newguy]

Sorry, but wtf ???

[scomac]

The banks sing a song about 'the common man' but their pricing takes them out of his reach.

There is no reason for sticking to 1000 shares for a buy. You can't buy fractional shares, but any integer (non-zero natural, for math purists) number would work.

Absolutely agree here. This is a non issue IMO. Rather than worry about how many shares your dollar will buy, concentrate more on keeping expenses below 1% of assets per annum. With current commissions at most discount brokers running + or - of $10 per trade, any trade in excess of $1000 could be justified; that's less than 20 shares of BMO at current prices.

[Sensei]

Hi,

I think as a general rule of thumb, companies will split when their stock goes over $100 although their are many exceptions such as Apple, Google, even Little Berk etc. However, since as others have pointed out above, there is no longer a 'lot' mentality at work. 10, 25, 30, 55, no problem here as one of the little people.

Personally, I don't get the rationale for splitting in many cases. For example, did anyone benefit from the Bird split?? The stock was about 36 when they split. No big ups or downs since then. No change in dividend. No change in the company.

[ThinkDividends]

I hate stock splits since I have to go back and adjust my spreadsheets. Big hassle with no direct benefit to me.

[j831robert]

Yup, I'm old and just for the record my first buy of BMO was in 1985 - 800 @29 1/4 (anybody else here old enough to recall fractional pricing), 1987 sold 200 @ 37.75, 1990 bought 200 @ 26.75 and 100 @ 28., 1992 sold 200 @ 43.50, Mar 1993 stock split and my 700 shares became 1400 @ 23., Feb 1994 crystalized 1400 shares at 29.125 (ACB) and later acquired another 100 shares, March 2001 stock split 2:1 at 30.936 providing an ACB on 3000 shares of 15.464. All the foregoing while I was a late newcomer to the game and in the Acquisitive Stage. Now, because I have 'acquired' I prefer to purchase in multiples of 500 or 1000 (easier math) but sure as hell couldn't have afforded to do so when we were raising our five kids and collecting a soldier's pay.

[newguy]

Yup, I'm old.......I prefer to purchase in multiples of 500 or 1000 (easier math)

Actually slide rulers aren't used anymore and you can buy something called a calculator.

newguy

[deaddog]

(anybody else here old enough to recall fractional pricing),

Yup: Now i see where the board lot trading comes from. Back in the day when you had to phone your broker and he'd tell you that odd lots would cost more. The good old days with 3% commish, End of dayinfo, and no CNBC.

[j831robert]

All of that - nice to see that that old dog ain't dead yet! Newguy - on the wall of my study hangs an abacus (look it up!), great for when the battery dies (purchased for the wall of my wife's office - she was a computer programmer using Fortran) and closer to hand is my old Alpina (a survivor from our car-rallying days and beats a slide-rule).

[pmj]

One frustration of high-value stocks arises if you want to DRIP the dividends. To DRIP a 4% yield quarterly-paying stock requires buying 100 shares (and that's hoping that the yield stays above 4% until you've accumulated a few more shares and generated some safety margin). At $70 that's $7000 - a not inconsiderable sum...

[Mitzy]

TD Bank has split several times over the years, and it's price was never over $100.

[Pickles]

One frustration of high-value stocks arises if you want to DRIP the dividends. To DRIP a 4% yield quarterly-paying stock requires buying 100 shares (and that's hoping that the yield stays above 4% until you've accumulated a few more shares and generated some safety margin). At $70 that's $7000 - a not inconsiderable sum...

That's using a synthetic drip set up by your broker. If you pay the fee (can't find it on BMOIL but recall it was around $50) to get stock certificates and arrange your own drip with the company itself, you can drip with as little as 1 registered share.

[pmj]

Is each dividend retained as cash until there's enough to buy a share - or is each dividend converted into a fractional share at the price on the dividend date? If the latter - do those fractional shares also earn dividends?

[Bylo Selhi]

Is each dividend retained as cash until there's enough to buy a share - or is each dividend converted into a fractional share at the price on the dividend date? If the latter - do those fractional shares also earn dividends?

You get fractional shares with each dividend payment in a corporate sponsored DRIP. This is because the stock transfer agent manages your holdings. Synthetic DRIPs, as offered by brokers, can only do whole share because their custodian, CDS, can only account for whole shares. (The US counterpart, DTC, does do fractional shares, so US brokers are able to offer synthetic DRIPs with fractional shares.)

And yes, your dividend payment is based on your holdings including the fractional part.