MARKET REACTION TO STOCK DIVIDENDS

MARKET REACTION TO STOCK DIVIDENDS
The stock dividend is the amount received as payment for being a stockholder if a certain company. It is paid by both the public and the private companies. By reaction to the stock dividend, the theory strives to infer that the participants in the stock exchange do not act upon information based upon the amounts of dividends paid out by a company. Although a good indicator of a company’s profitability, dividends are prone to be changed by a number of things. Such things may include the company’s decision to plow back profits or external factors such as economic conditions. Thus in an information-efficient capital market, the stock dividends act more as news than information and are thus rarely acted upon by the stock markets participants.
Amazon.com, Inc. is an online based company that sells anything and everything when it comes to the interest of the consumer. The store offers online solutions for all of the client’s defender supply-demand needs. The company is registered in the stock market with its stocks being called AMZN. In the year 2016, the organization had more than two hundred thousand employees and registered a growth in revenue for the second quarter of the year.
Undeniably the year 2015 was an exceptionally rosy year for the E-retail giant Amazon.com Inc. As of October 2015, the stock prices had experienced an 118% gain selling at $ 549.88. The earnings per share at the time $ 1.88. The increase in earnings per share was as a result of a similar increase in sales revenues standing at 36 million US dollars.

At the time the dividends issued increased due to the tremendous increase in profits. As a result, the share prices of the company in the stock market increased due to increased optimism by the company’s investors.in the previous year the company experienced a 52% share loss in 2014 having a revenue of 23 billion. This affected the amounts of dividends projected to be paid in that year. In the year 2016due to an initial offer of 1 million shares held by the CEO Bezos the company has experienced an increase in revenue of 30.8 billion up 31%. The stock prices have also experienced an increase of 2%. This left the earnings per share at 1.78 an 11 cent drop from the previous year.
Over the years the equity amount of the company has been reducing. Despite the plummeting of the dividend section of the company’s financial statement the stock prices have remained pretty much the same since the last decade. The company has reduced the dividend payment over time. This reduction has been as a result of different economic states within the United States. During the economic crisis of 2009, there was barely any robustness in the sales revenues achieved by the company. Because of this, they had to reduce the dividend prices so as to keep the company afloat.
Another reason why the company has had dynamic dividend prices is that the company has faced a lot of competition from other online stores that have come up due to technological advancement and increased internet access. Such competition has reduced the company’s profits and in turn, the amount of dividends they are able to pay out.
The company has had a steady stock price. Decline once in a while and increasing just as often. The company is able to maintain such stable prices due to continued profitability. This has led to the increase in investor confidence in the investment held at Amazon.com INC.

Abnormal returns were experienced first during the company’s inception. This is because back then the company acted as a monopoly in the field. Monopolies tend to accrue abnormal returns. This is because they control all or the largest part of the market share. After some time when new entrants made their way to becoming competitors of the concern the returns stabilized. As a result of the good name the firm holds in the capital markets it has been able to raise capital amounts to fund its expansion into other markets and include more products in the online store. In the 2016 NASDAQ reports the company was able to raise 757 million in a sale of one million shares in August. This led to an increase in share prices by 2%which would have ensured every investor gains money and their investment is worth the while.