8 Ways Investors like You Can Profit from Corporate Actions

8 Ways Investors like You Can Profit from Corporate Actions
3:27
Published on: Jul 24, 2024 9:00:00 AM

Corporate actions might sound complex, but they offer fantastic opportunities for retail investors to enhance their returns. Let’s explore what corporate actions are and discover eight ways you can profit from them.


What Are Corporate Actions?
Corporate actions are events initiated by a company that bring changes to its stock. These actions can affect the company’s shareholders and include things like dividends, stock splits, mergers, and more, and with a little knowledge, you can turn these shake-ups into profit. Here are 8 ways to do just that:

1. Cash Dividends: Enjoy Regular Income
Many companies share their profits with shareholders through cash dividends. By investing in dividend-paying stocks, you can enjoy a steady income stream. Reinvesting these dividends can compound your returns over time.

2. Stock Splits:
In a stock split, a company increases its outstanding shares, making the stock more affordable. For instance, in a 2-for-1 split, you get an extra share for every one you own. This can attract new investors, potentially driving up the stock price.

3. Share Buybacks: Benefit from Reduced Supply
When a company buys back its shares, it reduces the supply in the market, often increasing the value of remaining shares. This can be a positive indicator of the company’s confidence in its share's value. Look out for companies when they announce share-buy back schemes. 

4. Spin-Offs: Unlock New Value
A spin-off creates a new independent company, and shareholders often receive shares of this new entity. Spin-offs can lead to better performance for the new company, providing potential gains for shareholders.

5. Rights Issues: Buy Shares at a Discount
In a rights issue, companies offer shareholders the chance to buy additional shares at a discounted price. This can be profitable if the company’s prospects are strong and the market price of shares is higher than the discounted price.

6. Special Dividends: Reap Unexpected Rewards
Special dividends are one-time payments made by companies when they have excess cash. These unexpected rewards can provide a significant boost to your income, especially if you hold shares in companies known for issuing special dividends.

7. Mergers and Acquisitions
When companies merge or are acquired, shareholders might receive cash, new shares, or a combination of both. These transactions can lead to higher stock prices if the market views the merger or acquisition favorably. With acquisitions, one company buys a controlling stake in another. If you're holding shares of the company being bought, you might get a sweet payout or new shares in the acquiring company. Buyouts can often result in a nice bump in stock prices.

8. Bonus Issues: Receive Free Shares
In a bonus issue, companies distribute additional shares to existing shareholders at no extra cost. This increases your total shareholding, potentially boosting your returns if the company continues to perform well.

Take your own action
Corporate actions offer numerous opportunities for retail investors to enhance their returns. By staying informed and strategically participating in these events, you can make the most of your investment portfolio. Keep an eye on company announcements and market news to capitalize on these opportunities. Invest smart, stay informed, and watch your investments grow!


Jonathan Marais, Head of Social Media

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Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by an external contributor as general market commentary and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information (i) contained within this research and (ii) received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.

 

Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by an employee of EasyEquities an authorised FSP (FSP no 22588) as general market commentary and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information (i) contained within this research and (ii) received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.

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