10. How dividends, buybacks, and share issues change your stake

Where a company sends its money changes what remains behind each share. What happens if Hanbit pays a dividend, buys back shares, or issues new ones? Each example starts independently from the original year-end case. Amounts are KRW million unless stated otherwise; taxes and transaction costs are excluded.

A dividend transfers corporate cash to shareholders

A total cash dividend of 10 across 10,000 shares pays KRW 1,000 per share. Cash falls from 56.8 to 46.8, and book equity from 68.8 to 58.8. An investor with 100 shares receives KRW 100,000 while retaining a 1% stake. Dividends can distribute business earnings, but payment is not guaranteed.¹

With everything else unchanged, distributing cash also reduces the value remaining inside the company. This does not predict an exact KRW 1,000 observed price movement on the ex-dividend date: market news, taxes, and trading conditions can matter too. Dividend yield alone omits changes in the value of the holding.

A buyback changes cash and outstanding shares

Suppose Hanbit buys 1,000 shares at KRW 12,000 and holds them as treasury shares. It spends 12 and reduces outstanding shares to 9,000. A continuing investor's 100 shares represent 1.111% of outstanding shares.

If earnings remain 28.8 and the buyback is complete before the next year begins, leaving 9,000 shares outstanding all year, next-year EPS becomes KRW 3,200. A midyear purchase instead requires weighted-average shares.² Treasury shares held by the company and cancellation of issued shares should not be described as the same event.

Higher EPS does not itself establish value creation. Cash of 12 has left, and the business might need that cash. Paying too much can disadvantage continuing shareholders. Distinguish an announced authorization from completed purchases, and inspect cancellation or possible reissuance separately.

An issue changes ownership and brings in assets

Issuing 2,000 shares at KRW 12,000 raises 24 and increases shares to 12,000. A nonparticipating holder's 100 shares become 0.833% of the total. The additional corporate cash matters alongside the smaller percentage.

Assume, separately, that pre-issue equity value is 120. Issuing at the corresponding KRW 12,000 value raises post-issue equity value to 144 if cash is simply added; value per share stays KRW 12,000. Issuing those 2,000 shares at KRW 6,000 instead adds only 12, producing 132 million ÷ 12,000 = KRW 11,000 per share.

This simplified comparison excludes issuance costs and compensation through subscription rights. Actual rights, offering terms, and use of proceeds must be examined before deciding who gains or loses.

Keep a short record

Divide cash uses into reinvestment, acquisitions, repayment, dividends, and buybacks. Record each choice's purpose and price. If Hanbit increases distributions despite negative operating cash flow, ask whether funding comes from borrowing, genuine excess cash, or money needed for future operations. The largest payout is not automatically the best allocation.

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Footnotes

1. SEC Investor.gov, Stocks — FAQs. Dividends and shareholder investment risk. ↩

2. IFRS Foundation, IAS 33 Earnings per Share. Weighted-average outstanding shares and dilution. ↩