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Hey guys, speaking of DRP's:

I recognise that from a shareholders perspective, whether investors choose to take a DRP or the cash payment will, in theory, lead to the same reduction in share value.

Yet how does a DRP influence a company's balance sheet?

Remembering A = L + OE

My understanding is that a cash dividend is recorded by reducing retained earnings (OE) and reducing cash (A)

But with a DRP we reduce retained earnings (OE) and increase 'paid in capital' (OE) leading to a no change in OE or the overall balance sheet.

If the above is correct does this not influence ratios such as EPS and the like?

Put another way: if the same 2 companies performed exactly the same year on year but one company allowed a DRP and the other did not, the one which did not would have a far greater EPS?

<blockquote data-quote="kid hustlr" data-source="post: 678682" data-attributes="member: 43522">Hey guys, speaking of DRP&#039;s:I recognise that from a shareholders perspective, whether investors choose to take a DRP or the cash payment will, in theory, lead to the same reduction in share value.Yet how does a DRP influence a company&#039;s balance sheet?Remembering A = L + OEMy understanding is that a cash dividend is recorded by reducing retained earnings (OE) and reducing cash (A)But with a DRP we reduce retained earnings (OE) and increase &#039;paid in capital&#039; (OE) leading to a no change in OE or the overall balance sheet.If the above is correct does this not influence ratios such as EPS and the like?Put another way: if the same 2 companies performed exactly the same year on year but one company allowed a DRP and the other did not, the one which did not would have a far greater EPS?</blockquote>

[QUOTE="kid hustlr, post: 678682, member: 43522"] Hey guys, speaking of DRP's: I recognise that from a shareholders perspective, whether investors choose to take a DRP or the cash payment will, in theory, lead to the same reduction in share value. Yet how does a DRP influence a company's balance sheet? Remembering A = L + OE My understanding is that a cash dividend is recorded by reducing retained earnings (OE) and reducing cash (A) But with a DRP we reduce retained earnings (OE) and increase 'paid in capital' (OE) leading to a no change in OE or the overall balance sheet. If the above is correct does this not influence ratios such as EPS and the like? Put another way: if the same 2 companies performed exactly the same year on year but one company allowed a DRP and the other did not, the one which did not would have a far greater EPS? [/QUOTE]

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