My ETF shares just split?

Question

I guess my questions are

a) Why is this done

b) Is this a good thing?

c) How will it affect the dividends.

Answer 1

1. To satisfy the amateur side of the investing public

(makes them think they're getting something. Makes them think it's easier to buy shares). Knowledgeable investors get a good laugh from "splits".

2.  Makes no difference in the world

3.  Your dividends are paid by the underlying securities. Your net dividend amount does not change. If you were supposed to get a total of $100.... that's what you get.

BTW:  A split cannot possibly effect an ETF. It's "price" is mostly derived from the underlying securities. People that say otherwise have no clue what an ETF is.

Answer 2

Jeff's answer was very good, it should tell you almost everything you want to know.

The other answer contained a comment that isn't quite the case.  It said that the value of the ETF is derived from the value of the underlying securities.  This is only mostly the case.  All ETF's have a quotation for NAV (Net Asset Value).  Most sell at a premium or discount to NAV.  So, if your fund sells at a premium to NAV, it means there are people who are willing to pay more than the underlying value of the assets for the fund.  Some ETF's have rather large discounts, in excess of 10%, so there's feeling that the underlying assets are over valued.

Answer 3

1) Shares split to keep the price at a reasonable sounding level.

If you owned 500 shares at $100/share, and it splits, you now own 1000 shares at $50/share.

2) As an investor, splitting is neither good nor bad.

But it can come off as a sign of confidence from the company, so the stock may go up a bit.

3) Dividends aren't affected.  If you owned 500 shares that paid $2 each in dividends, you now own 1000 shares that pay $1 each in dividends.