1:5 Stock Split, Record Date Today: Smallcap 225% Dividend Stock HEG Trades Ex-Split; Shares Fall; BUY?

The shares of HEG Ltd took a 5% hit on October 18, dropping to a day's low of Rs 488.10 on the Bombay Stock Exchange (BSE) as the stock began trading on an ex-split basis. The stock decline followed the company's announcement that October 18 would be the record date for its 1:5 stock split, meaning shareholders would receive five shares for every one they currently own.

The company had previously informed the stock exchanges about the split in a regulatory filing. "We wish to inform you that the Company has fixed Friday, October 18, 2024, as the 'Record Date' for determining entitlement of Equity Shareholders for the purpose of sub-division / split of existing Equity Shares of the Company. The shares will be split in a 1:5 ratio, with each fully paid-up share of ₹10 face value divided into five shares of ₹2 face value, with all shares ranking pari passu in every respect," HEG announced.

A stock split essentially lowers the face value of each share while increasing the number of shares held by shareholders. In this case, HEG's equity shares, which had a face value of Rs 10 before the split, now have a face value of Rs 2 after the split. This move does not affect the overall value of a shareholder's investment but increases liquidity by making the shares more affordable for a larger pool of investors.

For example, if an investor held 10 shares before the split, they will now hold 50 shares, though the total value of the investment remains unchanged.

This stock split marks the first time HEG Ltd has undertaken such a move, as per available data from Trendlyne. The decision comes after a strong performance in the market. The stock has gained 42% over the past year and has risen by 28.5% so far in 2024. Over the last two years, HEG's stock price has more than doubled, offering investors a 123.6% return.

Corporate Developments

In addition to the stock split, HEG Ltd also announced that it will hold a board meeting on November 13, 2024, to consider and approve the company's quarterly and half-yearly results for the period ending September 30, 2024.

Despite the initial drop due to the stock split, HEG Ltd shares managed to recover some of the early losses. As of 1 pm on the National Stock Exchange (NSE), the shares were trading at Rs 501, reflecting a 2.5% dip.

Dividend and Historical Corporate Actions

For the financial year ending March 2024, HEG Ltd declared an equity dividend of 225%, amounting to Rs 22.5 per share. At the current share price of Rs 497.75, this translates to a dividend yield of approximately 0.9%.

Historically, HEG has also undertaken other corporate actions. The last time the company issued bonus shares was in 1994, at a 1:1 ratio, meaning shareholders received one additional share for every share they owned. The stock went ex-bonus on November 25, 1994. Additionally, HEG had issued rights shares in 1992 in the ratio of 5:8, with a premium of Rs 30 per share. These shares went ex-rights on June 26, 1992.