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sir again i do not understand how earning per share and share price will decrease after the scrip dividend issue ?
Because if shares are issued as dividend then earnings remain unaffected. So how can EPS or share price fall?
Also how does scrip dividend convert retained earnings into permanent share capital?
A scrip dividend is giving shareholders more shares instead of giving them a cash dividend.
If they issue more shares then there are more share in issue and so total earnings will not reduce, the earnings per share will reduce. Similarly if the same company has more shares then the market value per share will be lower.
Any dividend reduces retained earnings. If it is paid in cash then cash also reduces. If it is paid as shares then share capital increases.
Also how does scrip dividend convert retained earnings into permanent share capital?
so as far as your answer to the above statement is concerned, are you trying to suggest that share capital (and share premium reserve) increase at the cost of reduction of retained earnings reserve, even if the dividend is in the form of top-up of scrips(scrip-dividend)?
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