David1961
Thinks s/he gets paid by the post
- Joined
- Jul 26, 2007
- Messages
- 1,085
First of all, thanks for all the replies to my previous question about dividends. Maybe I need to take a class or read a good book on how the stock market works, because it seems the more I study the market and think I understand it, the less I actually do. Here's my question. The way I understand it, most stocks only have a specific number of shares outstanding. So if I want to buy 100 shares of XYZ, an existing shareholder must be willing to sell his/her shares to me. And if I want to sell 100 shares, someone must be willing to buy them. The price per share is dependent on supply and demand – if more people want to buy the stock, the price goes up. If more people want to sell the stock, the price goes down. When companies distribute dividends that are reinvested, isn’t this the same as the existing shareholders buying the additional shares? (which would normally make the share price go up since all these folks are buying more shares at once?) Who is selling these shares, or are the additional shares just created? If a company has, say, a million shares outstanding before they declare dividends, do they still have that many shares afterwards? Or are additional shares created to accommodate for the lower share price after the dividend distribution?