Before attending the BusinessCoach’s How to Invest in the Stock Market seminar last April 16, 2011, I asked myself how can I make money in the stock market. And this question was answered by our speaker, Jay G. Peñaflor, a Philippine Stock Exchange Sr. Market Education Specialist and who is also a Certified Securities Specialist (CSS).
Mr. Peñaflor revealed to us 10 participants, how we can make our money grow in the stock market. He said that there are two ways to make our money grow in the stock market. With his detailed explanation, I understand that I can make money through capital appreciation or when there is an increase in the market price of my stocks and through dividends by the company I invested in. Read below Mr. Peñaflor’s explanation…
Two Ways to Make Your Money Grow in the Stock Market:
1. Through an increase in stock price or capital appreciation
Capital appreciation is an increase in the market price of your stock. It is the difference between the amount you paid when buying shares and the current market price of the stock. However, if the company doesn’t perform as expected, the stock’s price may go down below your purchase price.
2. Through dividends declared by the company
Dividends are paid out to shareholders, representing earnings of the company that is not going to be reinvested in their business. There are two types of dividends that can be given by companies: cash and stock dividends.
Cash dividends is the earning of every share of stock declared by the company. So, if the company declares a dividend of 25 centavos per share, a stockholder with 10,000 shares will receive a cash dividend of P2,500.00, gross of tax (Php 0.25 x 10,000) in cash.
Stock dividends are additional shares given to shareholders at no cost. If the company declares a 25 percent stock dividend, a stockholder with 10,000 shares will be entitled to an additional 2,500 shares of stock. These shares can also be sold anytime after the shares have been issued.
Mr. Peñaflor also revealed to us that Philippine Long Distance Company stocks has the highest market price of all Philippine Stock Exchange (PSE) listed companies. With big earnings, PLDT is one of the most profitable companies in the Philippines and no doubt it is also the best dividend paying stocks company in the Philippine Stock Market.
Additional post to read: When Should We Start Investing Money in the Stock Market >>>
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