- What will be the impact on ROE, EPS and PE ratio after the stock dividend or bonus share issue?
Raghav SrivastavaThe Official Nerd
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Everything which is per share will change accordingly. Aggregates such as PAT etc will not be impacted. So the corresponding ratios will also change.
For example: Bonus offering will increase the company’s outstanding shares in the market but it will not affect Net Income. So, the EPS will fall because the denominator i.e. weighted average no. of shares outstanding will rise.
i think stock dividend se bhi roe ,eps and pe ratio me koi change nhi aata
A stock dividend or bonus issue will increase the no. of outstanding shares of the company because they are issuing new shares to investors. So, everything which is per share will fall.
For example: A bonus or a stock dividend will increase the outstanding shares.
EPS = Net income – Preference Dividend/Outstanding shares
See the denominator is increasing as a result of bonus or dividend. So, EPS will fall. But ROE will remain unaffected because:
ROE= PAT/Sh.Equity
So any bonus or stock dividend will not change ROE as Total Equity = Sh. Equity + Reserves & Surplus and both of these remain unchanged. PAT is also the same.
Similarly, P/E ratio also won’t change because of stock dividend and bonus issue
P/E= Price per share/Earnings Per Share
So, when stock dividend or bonus take place both price of the share and EPS will fall and therefore there would be no impact on P/E ratio.
Thankyou for the wonderful responses